Investors loading up on no-load funds: Report

Investors loading up on no-load funds: Report
Sales flourishing; meanwhile funds with upfront charges seeing mass exodus
MAY 24, 2012
By  JKEPHART
Investors are shunning mutual funds that charge a load fee as the fixation with cost drives the sales of no-load mutual funds and index funds. Net new cash purchases of mutual fund that charge a load fee, or a percentage of the sales price upfront, have been steadily declining since 2004. But over the past three years, they've fallen off a cliff, according to data from the Investment Company Institute, which is holding its annual general membership meeting this week in Washington, D.C. Sales of load-bearing mutual funds peaked at $49 billion in 2004 but declined steadily until 2007, when sales totaled only $15 billion. That year, however, was the last one in which load-bearing mutuals were in the black. After the financial crisis net sales have turned negative, with the funds suffering withdrawals of $109 billion between 2009 and 2011. Sales of no-load funds have flourished over the same three-year time period. From 2009 to 2011, no-load mutual funds have had net new cash purchases of $735 billion. Investors' demand for leaner-and-meaner also has been apparent in expense ratios. Equity funds, for example, have an average expense ratio of 1.44%; the median is 1.38%. But the asset-weighted average, which gives a larger weight to the biggest funds, shows that the average investor is paying only 0.8%, according to ICI. Index funds also have greatly benefited from the shift to cost-conscious investing. Assets in index funds, which have an average expense ratio of 0.13% grew to $1.1 trillion as of the end of 2011, from $170 billion in 1997. The influx of assets into index funds has pushed down their average cost as well. The average equity index fund had an expense ratio of 0.27% in 1997. Today, it's less than half that.

Latest News

Integrated Partners, Kestra welcome multigenerational advisor teams
Integrated Partners, Kestra welcome multigenerational advisor teams

Integrated Partners is adding a mother-son tandem to its network in Missouri as Kestra onboards a father-son advisor duo from UBS.

Trump not planning to fire Powell, market tension eases
Trump not planning to fire Powell, market tension eases

Futures indicate stocks will build on Tuesday's rally.

From stocks and economy to their own finances, consumers are getting gloomier
From stocks and economy to their own finances, consumers are getting gloomier

Cost of living still tops concerns about negative impacts on personal finances

Women share investing strengths, asset preferences in new study
Women share investing strengths, asset preferences in new study

Financial advisors remain vital allies even as DIY investing grows

Trump vows to 'be nice' to China, slash tariffs
Trump vows to 'be nice' to China, slash tariffs

A trade deal would mean significant cut in tariffs but 'it wont be zero'.

SPONSORED Compliance in real time: Technology's expanding role in RIA oversight

RIAs face rising regulatory pressure in 2025. Forward-looking firms are responding with embedded technology, not more paperwork.

SPONSORED Advisory firms confront crossroads amid historic wealth transfer

As inheritances are set to reshape client portfolios and next-gen heirs demand digital-first experiences, firms are retooling their wealth tech stacks and succession models in real time.