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Why Dave Prefers Up-front Fees

Dave's financial advice is often at odds with the advice of many financial "experts," and his recommendation for loaded mutual funds is no different. But, just as Dave's own life experiences influence his advice on dumping debt, so does his investing advice come directly from his approach to building his own wealth. Knowing what Dave recommends and why will help you be a smarter and more confident and successful investor as well.

Definitions And Recommendations

Loads are investing speak for fees, and all funds charge certain types of fees. In a front-end load fund, part of the fee is a commission you pay when you make the investment—on the front end. In a back-end fund, you pay commission when you take your money out of the fund. There are also no-load funds in which you pay no commission.

No-load funds might seem more attractive. No commission means money saved, right? Not necessarily. Dave actually recommends front-end load funds, especially for retirement planning.

Why Dave Likes Front-End Load Funds

Many investors hate the idea of paying around 5% of their investment for up-front commission. But because it's a one-time expense, the value of your investment grows without being bogged down by expensive fees. And, as your investment increases in value over time, the commission has less impact on the overall cost of owning the fund.


Market chaos, inflation, your future—work with a pro to navigate this stuff.

Loaded funds also come with help—an investing professional. The commission pays for your pro's extensive knowledge of the thousands of mutual funds available. The up-front commission is really not a lot to pay to have someone on your team, teaching you how to invest successfully.

The True Cost of No-Load Funds

No-load funds' low initial costs may look attractive, but don't be fooled!

  • There's no investing pro to help you select funds or to keep you on track to meet your investing goals.
  • Some no-load funds' yearly maintenance fees will make you wish you'd paid commission instead. They're based on the value of your fund, so as the value of your fund increases, so can your fees.

Mutual fund fees come in many variations, so it's sometimes hard to compare apples to apples. Eliminate the confusion by comparing the funds' expense ratios. Generally, a ratio of less than 1% is considered inexpensive. Funds with higher ratios need higher returns to justify the extra expense. A reasonable expense ratio combined with a long-term track record of excellent returns is a good sign of a high-quality mutual fund.

A Place For No-Loads

There are some good no-load funds available, and you can mix a few of them with your other mutual funds. Keep in mind though, without the advice of a pro, owners of no-load funds are likely to jump in and out of those investments, and that will bring down their rate of return. If you invest in a no-load, you'll have to discipline yourself to stay invested long term.

Want a Load of Good Advice?

Dave depends on his financial advisor to help him with his investing decisions. You can find your own financial advisor through the SmartVestor program. Your SmartVestor Pro will be dedicated to teaching you about investing while helping you build wealth Dave's way. Get in touch with your SmartVestor Pro today!

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This article provides general guidelines about investing topics. Your situation may be unique. If you have questions, connect with a SmartVestor Pro. Ramsey Solutions is a paid, non-client promoter of participating Pros. 

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About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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