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Sky-high sales loads have long driven us to steer clear of many otherwise impressive mutual funds. But as times change in the fund business, many of those onerous fees are disappearing for good.

How loads lead to losses
The following examples show just how much a fund's load fees can cost you:


5-Year Avg. Annual Return

10-Year Avg. Annual Return

Major Holdings Recently Included

Eaton Vance Dividend Builder (EVTMX)



Teva Pharmaceutical (Nasdaq: TEVA  ) , Vodafone (NYSE: VOD  )

Federated Clover Value A (VFCAX)



Anadarko Petroleum (NYSE: APC  ) , Exelon (NYSE: EXC  )

Compared with an S&P 500 index fund, which hasn't even broken even over the past 10 years, these funds' returns may seem impressive. But the Eaton Vance fund carries a hefty sales load of as much as 5.75%, while the Federated fund charges as much as 5.5%. Many investors would (wisely!) balk at such charges. If you invest $10,000 in a fund, and it lops off $575 on day one, you're left with just $9,425. 

Hooray for fee waivers!
But lately, more and more fund families are offering load-waived versions of many of their funds. Self-directed investors at major brokerages such as Schwab (Nasdaq: SCHW  ) and TD AMERITRADE (Nasdaq: AMTD  ) can most often gain access to these fee-free versions.

Load funds exist to reward financial advisors and others who sell the funds. Faced with the loss of such cushy payments, advisors might have caused a ruckus, fearing a competitive disadvantage. But that hasn't happened yet, and many fund companies are happy to see their funds better able to compete with no-load funds in the eyes of do-it-yourself investors like you.

Lighten your load
If a fund you have your eye on has a noxious load, and doesn't seem to have a load-waived version available, take a closer look. Some such funds waive their loads for investments in retirement accounts such as IRAs or 401(k)s.

In addition, keep in mind that if you really want to invest in a certain fund, it could still be worth paying a load. Imagine the $10,000 example noted above, where 5.75% was shaved off. If you start with the remaining $9,425, and it grows at an annual average of 12% for 10 years, it will amount to $29,300. That's an overall compounded growth rate of 11.3%, based on your original $10,000 investment.

Unfortunately, you never know how the fund will do. If you start off with a hefty load, you're taking much more of a chance. With so many terrific no-load (or load-waived) funds available, that's often a risk not worth taking.

Our Broker Center can help you find terrific brokers with the best selection of funds for your needs.

Longtime Fool contributor Selena Maranjian doesn't own shares of the companies mentioned in this article. Exelon is a Motley Fool Inside Value selection. Charles Schwab is a Motley Fool Stock Advisor recommendation. Try any of our investing newsletter services free for 30 days. The Motley Fool is Fools writing for Fools.

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