No-load funds are not hard to find, yet investors continue to pay up-front broker commissions to brokers and financial advisers for advice, but Jim Peterson, head of mutual fund research for Charles Schwab, argues that front-loaded funds are just a way for interested parties to make a buck.

"There's no investment value whatsoever to paying a load," Peterson told MarketWatch.

Nonetheless, Peterson predicts that long-term stock-market returns will start sinking, and when they do, investors will start paying careful attention to every percentage point.

Loaded funds were far more common when mutual funds were first introduced. But with time, that trend shifted, and the majority of funds stopped charging fees, according to Tom Roseen, senior researcher at Lipper.

Loads come in three varieties: front-end, where investors pay, typically, 5% at the time they purchase the fund; back-end loads, which can decrease with time, depending on how long investors cling to funds; and, level-loaded funds, which levy a consistent, annual fee, typically 1%.

Still, since the bear market of 2000 to 2002, investors have increasingly turned to loaded funds, and industry powerhouses such as Fidelity Investments and Janus have added loaded funds. The reason companies have begun introducing these less-attractive options is that since the millennial downturn, investors have been more willing to pay for advice and reassurance.

(c) 2006 Money Management Executive and SourceMedia, Inc. All Rights Reserved.

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.