I find that mutual funds are like other people's children... you either like them or you don't. I'm more in the middle to be honest with you and prefer ETFs to mutual funds because of the lower management fees, as well as the liquidity and ease of trading it like a normal stock.
For those individuals who do like mutual funds, it can be a daunting task to try and pick out what you believe to be the best mutual fund that suits your needs out of the thousands of mutual funds that currently exist on the market. While I'd prefer mutual funds that are less focused on fixed income and more tailored towards a specific sector or stock holdings that cover the entire market, there is one criteria that should be considered by all potential mutual fund investors.
To be complete, let's start with the basics. A mutual fund is an investment vehicle that houses capital collected by other investors for the purpose of investing this capital into a series of stocks, fixed income or other marketable securities. Mutual funds are managed by a "mutual fund manager" who typically collects a fee for his or her service to manage your capital. Fees can be lump sum based or they can be performance based. The performance of a mutual fund will depend on the performance of the holdings that are inside the fund itself, as well as any dividends collected from the holdings. The aim of the fund, unsurprisingly, is to grow invested capital and provide returns back to the mutual fund investors (or "capital suppliers") through price appreciation of the mutual fund. The investment vehicle is publicly traded similarly to a stock, and can experience upwards and downwards movement depending on the performance of its holdings. Mutual funds will typically require a minimum capital investment from each investor, sometimes as little as $500, or as large as $50,000. Some mutual funds require capital to be invested for a minimum length of time. Otherwise, the investor will be subject to a penalty if capital is removed from the fund prematurely. Mutual funds will also have a prospectus which will contain information about the mutual fund such as the holdings it contains, minimum required investment, historical performance, and the investment strategy or objective.
So getting back to the one criteria that is important: load type
Typically, there are 3 types of mutual funds: No Load (NL), Front Load (FL), and Back Load (BL). Load refers to the management fee an investor will pay the mutual fund manager for their services rendered. Front Load refers to an upfront payment to the manager at the time when an investor first shovels capital into the mutual fund. Essentially, a cut comes right off the top of the initial investment to pay the fund manager (this can be considered as an "entry fee" into the fund). Back load is the opposite of front load, where a fee is paid to the manager at the time when an investor pulls their money out of the mutual fund (this can be considered as an "exit fee" from the fund). A lump sum or percentage based on the closing amount of the investment will be taken. Regarding a percentage based commission, front load will result in an investment pool that is smaller to start off with than what was originally invested. Back loaded will result in a larger fee subtracted from the total investment being pulled if gains occurred, but will result in a smaller fee if the investment suffered losses.
The third type of mutual fund which is what every mutual fund investor should buy are No Load funds. No load funds are simply funds that don't require a management fee to be paid by the investor. There is speculation around no load funds that suggests these funds under perform loaded funds, and hence why you should buy a loaded fund and pay the fee in exchange for a well managed appreciating investment. Well unfortunately, this is absolutely false and there is no concrete statistical evidence that proves no load funds consistently under perform loaded funds.
If you are looking for a mutual to invest in, start by only considering no commission fee "No Load" mutual funds. A general market tracking mutual fund will see price appreciation over time and will provide an investor with modest returns without the worry of having to manage your own portfolio, or pay management fees. Like other people's children, let someone else take care of the load.