This is the fourth in a series of 10 excerpts from Investing for Canadians for Dummies.

When you select a mutual fund, you can use a number of simple, commonsense criteria to greatly increase your chances of investment success. For any particular type of mutual fund (larger-company, Canadian stock funds, for example), hundreds of choices are available. The charges that you pay to buy or sell a fund, as well as the ongoing fund operating expenses, can have a big impact on the rate of return that you earn on your investments.

Remember: Fund costs are an important factor in the return that you earn from a mutual fund because fees are deducted from your investment returns and can attack a fund from many angles. All other things being equal, high fees and other charges depress your returns.

Tip: Stick with funds that maintain low total operating expenses and that don’t charge sales loads (commissions). Both types of fees come out of your pocket and reduce your rate of return. Plenty of excellent funds are available at reasonable annual operating expense ratios (less than 2 percent for stock funds; less than 1 percent for bond funds).

Avoid load funds: The first such fee that you need to minimize is the sales load, which is a commission paid to investment advisers and “financial planners” who work on commission and sell mutual funds. Commissions, or loads, can range up to 6 percent or more of the amount that you invest. Sales loads are an additional and unnecessary cost that is deducted from your investment money. You can find plenty of outstanding no-load (commission-free) funds.

Beware: Investment advisers sing the praises of buying a load fund, warn against no-loads, and even sometimes try to obscure the load. For example, advisers may tell you that the commission doesn’t cost you because the mutual fund company pays it. Remember that the commission always comes out of your investment dollars, regardless of how cleverly some load funds and brokers disguise the commission.

Investment advisers also may say that load funds perform better than no-load funds. One reason, advisers claim, is that load funds supposedly hire better fund managers. Absolutely no relationship exists between paying a sales charge to buy a fund and gaining access to better investment managers. Remember that the sales commission goes to the selling broker, not to the fund managers. Objective studies demonstrate time and again that load funds not only don’t outperform but, in fact, underperform no-loads. Common sense suggests why — when you factor in the higher commission and the higher average ongoing operating expenses charged on load funds, you pay more to own a load fund, so your returns are less.

Another problem with commission-driven load fund sellers is the power of self-interest. This issue is rarely talked about, but it’s even more important than the extra costs that you pay with load funds. When you buy a load fund through a salesperson, you miss out on the chance to get holistic advice on other personal finance strategies. For example, you may be better off paying down your debts or investing in something entirely different from a mutual fund. But in our experience, salespeople almost never advise you to pay off your credit cards or your mortgage — or to invest through your company’s retirement plan or in real estate — instead of buying an investment through them.

This excerpt is taken from Investing for Canadians for Dummies, 3rd edition, by Eric Tyson and Tony Martin, copyright 2009 by John Wiley & Sons, Inc. This material is used by permission of John Wiley & Sons, Inc.