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Trapped in a Loaded Mutual Fund

Contrary to all the advices we have given you, once you own a loaded mutual fund do not try to get rid of it. You have already paid the load and have deprived yourself of the money. Your money is gone and by getting out of the fund will not compensate for the already incurred losses. Your situation will further worsen especially if there is a back-end load. Just try to get the best out of it.

On the other hand, it is also not obligatory to keep the fund. This is the case when there is no back-end load. If there is such, study carefully the mutual fund prospectus to see whether the load decreases over a period of time. Some loads are structured in such a way that the longer you stay in the fund, the lower the load becomes. So, ask an expert to help you in your decision or directly address the fund managers to inform you about alternative courses of action.

Be prepared to sell the fund no matter the back-end load. The salesman has already received his/her commission, so even if you keep the loaded mutual fund longer, you have already lost the money. You do not have to take the risk of incurring further expenses such as the charge of 12b-1 fees, which fund managers justify for marketing purposes. The back-end load may be compensated by the gains you can get form another more beneficial fund. By keeping the loaded mutual fund you are to be charged different fees over and over again, which leads to loss of your hard earned money.

Our advice: You should clarify for yourself what is the most appropriate fund for you. You should start by considering your best investment portfolio structure. You should also determine whether this portfolio conforms to your future plans. Other criteria that should be met include:

  • Good record
  • Proficient management
  • Realistic fees

Sell it whenever you cannot justify your investment decision in this particular fund!

Sell it whenever you feel that this is a fund you would not recommend to your friends or you yourself will never again invest in it!

The load itself does not represent sound excuse for selling a loaded mutual fund. You should always consider such factors as your personal situation and needs and the gains you receive form the fund. You should also consider the specifics of the load itself.

But never forget that you can always find a better deal among the many load free funds!

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