Question

Briefly explain:
(i) What is a "load" for mutual fund and what is the difference between "load" and *no-load" funds.
(ii)In the current situation of rising inflation, would investment in real property be better than the stock market? Discuss.

Answer 1

(i) What is a "load" for mutual fund and what is the difference between "load" and *no-load" funds.
Answer: To understand "Load" for mutual fund let's first understand the structure of load.
Load is an amount which is paid by the investor to subscribe to the units or to redeem the units from the scheme. This amount is used by the AMC to pay commissions to the distributor and to take care of other marketing and selling expenses. Load amounts are variable and are subject to change from time to time.
In other words, a load fund is a mutual fund that carries a commission to purchase or sell its shares. The load is calculated as a percentage of the amount that an investor purchases or sells. The investor pays the load, which is used to compensate a broker or investment advisor for their time and skill in selecting an appropriate fund.
When a load is paid at the time of purchase, it is referred to as a front-end load.
A load paid when shares are sold is referred to as a back-end load or a contingent deferred sales charge.
A mutual fund may charge between 4% to 8% of the investment amount or a flat fee.
The load may be applicable on other types of transactions such as Reinvestment of Income Distribution, capital withdrawal option, Switch in/out, SIP/SWP/STP.
Advantages of Load Funds
Although load funds charge a commission, they are still preferred by some investors over no-load funds. Investors pay a commission to the financial intermediary that conducts research on the most appropriate mutual fund to invest in and makes an investment decision on behalf of the client.
Using a financial intermediary protects inexperienced investors from making wrong choices due to a lack of knowledge. Using an expert can help the investor realize better returns by only incurring a small commission.
Difference between "Load" and "No-load" funds
The reason why most investors go for load funds, as opposed to no-load funds, is to compensate the financial intermediary who did the research, recommended, and sold the fund to them. The financial intermediaries, such as brokers and financial planners, use their expertise to identify the best possible fund for their client.
In exchange for their skill, the intermediary is paid a commission. If an investor possesses the expertise of researching the best investment and making independent decisions on the sale or purchase of mutual funds, then the investor achieves no benefit in buying load funds from a financial intermediary.
Many investors prefer no-load funds since the option minimizes expenses, which translates to higher returns. A no-load fund is a fund that does not charge a load. No-load funds can be redeemed after a certain duration of time without a sales charge.
The expenses incurred in managing no-load funds are deducted from the gross returns of the fund. For example, if a fund returns 10% before fees and expenses, and the total expenses and expenses amount to 1%, the investor will earn a net return of 9%. No-load funds do not charge sales loads but may charge other types of fees such as exchange fees, redemption fees, and account maintenance fees.
(ii) In the current situation of rising inflation, would investment in real property be better than the stock market? Discuss.
Answer: Investment in Real property is considered as the most important and popular among all the asset classes. However, the popularity of this asset category is large because of a reason not related to investment. For those who have bought their own houses, it is the largest expense in life. The word used here is “expense”, and not “investment”. This would be elaborated later, but it is pertinent to mention here that in majority of cases, individuals purchase real estate for self- occupation. This should not be considered as an investment, since selling the same may have a negative impact on one’s lifestyle.
Real property could be further classified into various categories, viz., residential property, land, commercial property, etc.
As an asset category, real property exhibits certain traits, some of which are listed as under:
 Location is the most important factor impacting the performance of an investment in property
 Real property is illiquid
 It is not a divisible asset
 Apart from capital appreciation, it can also generate current income in form of rents  In case of real property, the transaction costs, e.g., brokerage charges, registration charges, etc. are quite high. This would bring down the return on investment.
 The cost of maintenance of the property, as well as any taxes payable must be adjusted before calculating the return on investment, something that many individual investors do not. These expenses are also quite high, and cannot be ignored.
Examining historical returns data during periods of high and low inflation can provide some clarity for investors. Numerous studies have looked at the effect of inflation on stock returns. Unfortunately, the studies have often produced conflicting results. Still, most researchers have found that higher inflation has generally correlated with lower equity valuations. This has also been shown in emerging countries, where the volatility of stocks is greater than in developed markets.The research suggests that almost every country suffered its worst real returns during high inflation periods. Real returns are nominal returns minus inflation. When examining S&P 500 returns by decade and adjusting for inflation, the results show the highest real returns occur when inflation is 2% to 3%.
Inflation greater than or less than this range tends to signal a macroeconomic environment with larger issues that have varying impacts on stocks. Perhaps more important than the actual returns are the volatility of returns inflation causes and knowing how to invest in that environment.
Therefore some key takeaways are as follows:

• Stocks and real estate represent important paths to wealth.
• Historically, the stock market experiences higher growth than the real estate market, making it a better way to grow your money.
• Stocks are more volatile than housing, making real estate a safer investment.
• Stock earnings are taxed as capital gains when realized.
• Stocks have no tangible value, whereas real estate does.

From this we need to understand the key differences which are as follows:
While stock prices and housing prices both reflect the market value of an asset, one should not compare houses and stocks for market returns only. For one, stocks are historically more volatile than real estate, meaning that those higher returns may also come with higher risk.
Stocks represent an ownership interest in a publicly-traded company. They are not tangible, physical assets and serve no utility other than a store of value and a liquid security instrument. While there is some reason to believe that the overall stock market would gain in real value over time, there is little reason to believe that a single stock should grow in perpetuity.
Real estate is not like stocks. Some people speculate with real estate prices, but commercial and residential real estate serve tangible functions. People live in houses and condominiums. Businesses operate out of commercial property. Physical property has value.
This introduces two conflicting phenomena. On the one hand, existing real estate structures should naturally lose value over time through wear, tear, and depreciation. An unmodified home has no reason to grow in value over time; all of the floors, ceilings, appliances, and insulation age and become less valuable.
Therefore, it is important to note that when stock prices tend to have higher returns, they also incur capital gains taxes. On the other hand, there are significant tax advantages to buying a home.

To understand "Load" for mutual fund let's first understand the structure of load.