How to invest in mutual funds with zero sales load

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In investing in investment funds like mutual funds, you would want the cost of investing as low as possible. This is done by selecting a fund with the least cost. The higher the mutual fund fees, the lesser your potential earnings becomes.

And one of the fees that you can actually avoid is the sales load. Sales load is charged by the fund every time that you invest regardless if it’s your first time or additional investment. Many of the companies charge fees ranging from 1% to as high as 5%.

But do you know that there are actually ways for you to avoid paying the sales load? Read on and find out more.

Sales load and mutual funds

Most of the mutual funds being offered in the Philippines have sales load. Only very few don’t have them. That’s why it is really important to carefully select the investment to go with. There are two different kinds of sales load.

  • Front-end
  • Back-end

The front-end fee charges you every time that you put up capital whether at the time of opening the account or additional savings. The back-end fee, as the name suggests, would not charge you when you put in money to your fund, but it would be collected when you redeem your shares and get your money back.

And so be careful when you see a fund that has no front-end fee or sales load. It might turn out that they charge it when you withdraw your money. How can you check? Read up on the prospectus of the fund. You can also visit the website or drop by their office to ask for information. Below you’ll see the different investment funds offered by mutual fund companies:

NameTypeSales load
ATRAM Dynamic Allocation Fund, Inc.Balanced5%
ATRAM Philippine Balanced Fund, Inc.Balanced5%
Bahay Pari Solidaritas Fund, Inc.Balanced1.50%
Cocolife Dollar Fund Builder, Inc.Balanced0.50%
First Metro Save and Learn Balanced Fund Inc.Balanced2.00%
Grepalife Balanced Fund CorporationBalanced2.00%
NCM Mutual Fund of the Phils., Inc.Balanced3.36%
PAMI Asia Balanced Fund, Inc.Balanced3.36%
PAMI Horizon Fund, Inc.Balanced2.80%
Philam Fund, Inc.Balanced3%
Sun Life of Canada Prosperity Balanced Fund, Inc.Balanced2.00%
Sun Life Prosperity Achiever Fund 2028, Inc.BalancedNone
Sun Life Prosperity Achiever Fund 2038, Inc.BalancedNone
Sun Life Prosperity Achiever Fund 2048, Inc.BalancedNone
Sun Life Prosperity Dollar Advantage Fund, Inc.Balanced2%
Sun Life Prosperity Dollar Wellspring Fund, Inc.Balanced2%
Sun Life Prosperity Dynamic Fund, Inc.Balanced2%
ALFM Dollar Bond Fund, Inc.Bond5%
ALFM Euro Bond Fund, Inc.Bond5%
ALFM Peso Bond Fund, Inc.Bond1.25%
ATRAM Corporate Bond Fund, Inc.Bond2.24%
ATRAM Total Return Dollar Bond Fund, Inc.Bond5%
Cocolife Fixed Income Fund, Inc.Bond2%
Ekklesia Mutual Fund Inc.Bond2%
First Metro Save and Learn Dollar Bond Fund, Inc.Bond1%
First Metro Save and Learn Fixed Income Fund,Inc.Bond2%
Grepalife Dollar Bond Fund Corp.Bond2%
Grepalife Fixed Income Fund Corp.Bond2%
PAMI Global Bond Fund, IncBond3%
Philam Bond Fund, Inc.Bond3%
Philam Dollar Bond Fund, Inc.Bond3%
Philequity Dollar Income Fund Inc.Bond1%
Philequity Peso Bond Fund, Inc.Bond1%
Soldivo Bond Fund, Inc.Bond3.36%
Sun Life of Canada Prosperity Bond Fund, Inc.Bond2%
Sun Life Prosperity Dollar Abundance Fund, Inc.Bond2%
Sun Life Prosperity GS Fund, Inc.Bond2%
ALFM Growth Fund, Inc.Equities3.00%
ATRAM Alpha Opportunity Fund, Inc.Equities5.60%
ATRAM AsiaPlus Equity Fund, Inc.Equities2.24%
ATRAM Philippine Equity Opportunity Fund, Inc.Equities5.60%
Climbs Share Capital Equity Investment Fund Corp.Equities2.00%
First Metro Consumer Fund on MSCI Phils. Inc.Equities2.00%
First Metro Save and Learn Equity Fund,Inc.Equities2.00%
MBG Equity Investment Fund, Inc.Equities5%
One Wealthy Nation Fund, Inc.Equities3%
Philam Strategic Growth Fund, Inc.Equities3.00%
Philequity Dividend Yield Fund, Inc.Equities5.00%
Philequity Fund, Inc.Equities5.00%
Soldivo Strategic Growth Fund, Inc.Equities3.36%
Sun Life Prosperity Philippine Equity Fund, Inc.Equities2.00%
Sun Life Prosperity World Voyager Fund, Inc.Equities2.00%
United Fund, Inc.Equities2.00%
PAMI Equity Index Fund, Inc.Index3.36%
Philequity MSCI Philippine Index Fund, Inc.Index5.00%
Philequity PSE Index Fund Inc.Index3.50%
Philippine Stock Index Fund Corp.Index1.50%
Sun Life Prosperity Philippine Stock Index Fund, Inc.Index2.00%
ALFM Money Market Fund, Inc.Money market3%
First Metro Save and Learn Money Market Fund, Inc.Money marketNone
Philam Managed Income Fund, Inc.Money market ? 
Sun Life Prosperity Dollar Starter Fund, Inc.Money marketNone
Sun Life Prosperity Money Market Fund, Inc.Money marketNone

Why do mutual funds charge sales load?

It is unclear how the money collected from sales load is going to be utilized by mutual fund companies.

A possible explanation is that they form part of the compensation for certified investment solicitor (CIS), the representative who sells the funds. The CIS is a person who took licensing exam administered by the Securities and Exchange Commission (SEC) that would allow them to offer mutual funds to the investing public.

You might think that you may just directly go to the company and open an account there so you don’t have to need the services of the CIS and avoid paying the fee. But that’s not almost always the case because accounts are usually assigned to a CIS.

Effects of mutual fund sales load on long term investing

If you don’t do your own research, you’re going to pay more without you even knowing it.

Capital preservation

The first obvious effect is that your capital is diminished. In the case of the front-end fee, a percentage of your money is taken away from the final invested amount.

So for example, if you place P2,000 in a fund with a 5% front-end fee, then what ends up being invested is only P1,900. And if you forecast putting in that amount for three decades in a 5%-, 2%- and 0%-fee, this is how the total invested amount would looked like.

YearCapital5%2%0%
12,000 per month22,80023,52024,000
2 45,60047,04048,000
3 68,40070,56072,000
4 91,20094,08096,000
5 114,000117,600120,000
10 228,000235,200240,000
15 342,000352,800360,000
20 456,000470,400480,000
25 570,000588,000600,000
30 684,000705,600720,000

As you can see, in 30-year period, you end up losing money with sales load. If you invest in a zero sales load fund, you know that whatever you put in will end up being invested.

Compound interest

If you’re planning to invest for long term, such as preparing for your child’s education or retirement, then the negative impact can be huge on your potential earnings. This is the result of diminished capital discussed earlier. Sales load lowers the amount that gets invested, and the consequence is that the growth of your money is also less than if you put it in a no-load/zero-load fund.

The table shows the growth of savings in 30 years under different sales load/front-end fees: 5%, 2% and 0%. I did the math in the table below with the following assumptions:

  • An investment capital of 1 million pesos.
  • The fund grows 7% annually. This is only a math projection. Actual results vary.
  • Time horizon is 30 years.
YearCapital5% fee2% fee0% fee
11,000,0001,016,5001,048,6001,070,000
2 1,087,6551,122,0021,144,900
3 1,163,7911,200,5421,225,043
4 1,245,2561,284,5801,310,796
5 1,332,4241,374,5011,402,552
10 1,868,7941,927,8081,967,151
15 2,621,0802,703,8512,759,032
20 3,676,2003,792,2913,869,684
25 5,156,0615,318,8845,427,433
30 7,231,6427,460,0107,612,255

Zero-fee is the clear winner. It also allows you to gain the most compared to the other options that have the fee. As you can see from the table, a 1 million capital will grow to ₱7,612,255 compared to ₱7,460,010 (for 2% fee) and ₱7,231,642 (for 5% fee).

And here is another scenario where a ₱24,000 annual investment is made.

YearCapital5% fee2% fee0% fee
124,00024,39625,16625,680
248,00050,50052,09453,158
372,00078,43180,90782,559
496,000108,317111,737114,018
5 120,000140,295144,725147,679
10 240,000337,066347,710354,806
15 360,000613,048632,407645,313
20 480,0001,000,1261,031,7091,052,764
25 600,0001,543,0241,591,7511,624,235
30 720,0002,304,4652,377,2382,425,753

Strategies to avoid mutual fund sales load

To avoid paying the sales load, you have four options.

  1. Choose a sales load-free fund.
  2. Be an IMG member
  3. Open a stock broker’s account that offers zero sales load mutual funds.
  4. Go for UITF.

1. Choose a zero sales load mutual fund

I have written a separate article on mutual fund companies and comparison of mutual fund fees. You can actually check the tables and choose the one that indicates “None” under Sales Load column.

However, since most funds do charge this fee, you might be left with very few options. You might end up choosing between a fund where you can lessen your cost but does not suit you, and that is not good because you may end up making decisions unfavorable to you in the long run.

For instance, you might be in a low-cost, low-risk fund which might deprive you of the chance to earn higher in an aggressive fund.

2. Be an IMG member

International Marketing Group or IMG is a company that offers free financial education, healthcare plans, and their mutual funds have zero sales load.

The only issue is that for you to enjoy the benefit of zero sales load investing, you have to pay the membership fee.

The membership fee is about ₱3,000 to ₱4,500, which can be steep for most Pinoys. Also, that amount can actually already be allocated to start a fund and not just to open a membership.

Additionally, it is also not appropriate for you for you if your only goal is to invest in mutual fund with the least cost. Why? You’re paying and losing money if you end up not maximizing all the advantages that the membership offers.

3. Open a stock broker’s account with zero sales load mutual funds

Good thing that stock brokers allow the public to invest not only in stocks but also in investment funds.

As far as I know, there are two stock brokerage companies that have online platforms that make it possible for you to avoid sales load: First Metro Securities and COL Financial.

When you invest, there is no membership fee. The money that they require you to open the account can be used to invest in the funds right away.

First Metro Securities is an affiliate of Metrobank, and it has the FundsMart platform. You are given 25 funds from 6 leading investment houses in the Philippines. What’s more, the sales load is waived.

First Metro Securities FundsMart

COL Financial has the Fund Source platform where you are given a list of funds that you can choose. What’s good is that you can actually start opening an account for as low P5,000. And you can also save because you don’t have to pay the sales load.

COL Financial brochure

4. Go for UITF

UITF or unit investment trust fund is similar to mutual funds. While mutual funds are offered by investment companies, you can actually open a UITF through the banks or trust companies. You may read the separate article for a full discussion on the difference between a UITF and mutual. Now, most UITFs don’t have any sales load. You can check this article for comparison of UITF fees.

Take-away

  1. Reduce cost of investing as low as possible in order to maximize gains.
  2. You can avoid paying sales load. There are funds out there that do not charge them.
  3. Sales load diminishes capital. It also drags potential earnings when investing long term.
  4. Invest in a fund that suits your investor profile (risk appetite, time horizon, etc.) and one that has the least cost.
  5. There are four ways to avoid sales load: shop around to find a fund with zero sales load, sign up as IMG member if you think you can enjoy most of their benefits and take advantage of their zero-sales load MFs, open stock broker accounts like COL Financial and First Metro Securities, or invest in UITFs.
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24 thoughts on “How to invest in mutual funds with zero sales load”

  1. Lots of useful content here when it comes to investing. Fees really do matter, they really eat away at your earnings over time.

    That said, another option for zero sales load are the ATRAM mutual funds offered through Seedbox.ph! Not all ATRAM funds are available there but the ones that are there did not charge sales load.

    1. Hi, Luis. Please point me to a reliable source that ATRAM does not charge sales load when investing through Seedbox. A screenshot, a news article, a press release from either companies would work. Thanks.

      1. Hi, forgot about this comment thread. Here are screenshots I took of the product pages of five ATRAM mutual funds on Seedbox that confirm they have no sales load:
        https://imgur.com/a/atHK7S7
        I couldn’t find a news article or press release stating it, but I can personally confirm that my investments are credited in full without sales load. That said, I think the best place for zero-load mutual funds is still COL Financial which also has the ATRAM mutual funds available on Seedbox.
        Hope this helps, more power to your articles, they are some of the best resources on Philippine investing on the internet

  2. Thank you for this. I’ve been looking for an explanation of the difference between MF and UITF and mostly what I’ve read is pointing on who offers them but they never got to explaining the things you’ve mentioned. You have even given an example which makes it even more understandable.

  3. Thank you very informative!! Id like to ask if i bought a mutual fund via online stock broker, since sales load was taken off, are there any other fees given by stock broker?

    1. Hi, Ann. As far as their disclosures are concerned, there are no more fees taken by the stock broker.

    1. Hi, Michael. They’re sister companies. First Metro Securities is a stock brokerage company (where you can buy stocks and mutual funds) and First Metro Asset Management is a mutual fund company (where you can only buy mutual funds).

  4. wala daw pong sales load sa ALFM peso bond fund and ALFM money marker fund according sa relationship manager ng BPI.

  5. Hi! If First Metro Sec and COL Financial both subscribe to different mutual companies with sales load, how come that these two stock brokerage companies (FMS and COL) offer “no sales load” for their investors? Please enlighten me. I’m a newbie. Thank you!

    1. Hi Jai. I am not sure what you mean by “both subscribe to different mutual companies with sales load”. As has been mentioned, sales load goes to the mutual fund agent that facilitated in opening the account. In this case the agent is COL and First Metro Sec, and they both decided not to charge the fee.

      1. Though I did not construct my question well that somehow gave you confusion, still, you were able to answer what I intended to ask. You are really good at this. Hands down, pesolab! 🙂

  6. Hi, Pesolab!

    With regards to the comment above about other fees given by stock brokers, you said in your reply, “As far as their disclosures are concerned, there are no more fees taken by the stock broker.”

    But, like what you said in your articles, MFs have management fees. Upon visiting the websites of the two stock brokers (FMS and COL), it seems they really do not disclose the exact amount of this fee (unless I overlooked it). But, can you give me an idea how much their management fees are? So, I can finally decide if I will invest through an online broker or UITF instead.

    Thank you for your explanations and detailed computations! It really helped me a lot!

    1. Hi Jai. The statement “there are no more fees taken by the stock broker” holds true as far as sales load is concerned, but it doesn’t mean that the stock brokers have the power to waive management fee and other fees charged by the mutual fund.

      The management fee of funds are the same regardless if you open the account through an agent, directly at the mutual fund company or stock brokers like COL and First Metro Sec. The management fee is described in the prospectus of the mutual funds, so if you wish to see how much they are you can either check this article on mutual fund fees or you can read the prospectus of each and every fund in which you are interested.

      1. Salute to your very detailed explanations! Grabe, very patient to answer queries of your readers. Thank you very much!

  7. impressive blog! but i am just curious how about the mutual funds with back end fees but decreases over time, i mean with holding period for example of 5 yrs then there will be no charge. Am I going to get the same return as to the investment with 0% sales load? thanks!

    1. Hi Lara. For as long as no sales load has been charged regardless if it’s front-end or back-end, then that’s fine. The next thing you’re going to check is the management fee. Here is an article on the best index fund that tries to track the impact of management fee on returns.

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