What used to be a two-way debate in the mutual fund industry has turned into a three-way argument. Once, an investor in mutal funds only had a choice between load funds and no-load funds. But now a third category is being carefully watched and causing a fair amount of controversy. In the last several months a few fund companies, in an effort to offset unexpectedly high marketing costs, have introduced ''low load'' funds.
* The Fidelity Group of Boston, which already had a 3 percent load on its Magellan and Mercury Funds, this year put a 2 percent charge on its new Select Portfolios.
* The Kansas City-based Twentieth Century Ultra Fund, a large, successful aggressive-growth fund, charges 0.5 percent to invest and the same for withdrawals.
* And a few months ago, the Keystone Group went from a full-load status to what it calls ''full-value investing.'' Like most load funds, the Boston-based Keystone Funds are sold through brokers who received their commissions through the front-end load. These brokers will still be paid, but their money will come from a portion of the fund's assets.
Traditional load funds take part of the investor's initial stake - usually 81 /2 percent - as a sales charge before any money is spent on stock or bond purchases. So if someone sends in $10,000, only $9,150 is actually being used. Depending on how well the fund performs, it may take from a few weeks to several months to earn back the $850.
No-load funds, which became widespread in the 1970s, have no such ''front end'' charges. The profits at these companies come from a small percentage - usually one-half of 1 percent - of the assets each year.
The theory behind load funds has been that an individual is paying for the advice and services of a professional in selecting the best fund and knowing when to move from one type of fund to another. But, as people have become better informed about how mutual funds work, they have been able to select their own funds. In doing so, they have increased the no-loads' share of the market from 20.5 percent in 1978 to 31.5 percent this year, according to the Investment Company Institute, the industry trade group.
From an investment point of view, most studies show, there is almost no difference between the performance of load funds and the no-loads - except for the loss of that 81/2 percent, which is never quite made up on average.
This is why the mini-move to low-loads is causing some controversy.
''It's not in the best interest of the investor,'' argues Sheldon Jacobs, editor of the No-Load Fund Investor, a quarterly newsletter and yearly handbook on no-load funds. ''Other things being equal, you should buy a fund with no load , as opposed to a low load.''
But that, fund executives respond, is part of the reason for the new low-loads. With some funds, all other things are not equal. The example of a low-load fund cited most often is Fidelity's Magellan Fund. In the last five years the value of its shares has increased more than 500 percent. That kind of performance gets attention, including from people who do not know much about mutual funds and need lots of help from the firm's telephone representatives.
''The issue ought to be looked at in terms of delivery,'' contends Victor Kramer, Fidelity's vice-president and director of retail marketing. ''How do people buy the product - through their broker or by phone?''
Mr. Kramer explained that Fidelity phone representatives have to spend much more time explaining popular funds like Magellan, the Select Portfolios, and the Mercury Fund. Also, the firm has to send out substantially more sales literature , prospectuses, and applications to potential customers, many of whom do not open accounts.
Something else that has increased costs relative to the amount of money being invested, Mr. Kramer points out, is individual retirement accounts (IRAs). With a maximum annual investment of $2,000 (or $2,250 for a spousal IRA), ''these accounts by their very nature are small,'' he says. ''Don't get me wrong. I like the business. But the fact is, you can't make any money on a $2,000 IRA.''
''In most aspects of our economy, the buyer pays for the expense of selling the product,'' he continues. With this justification, Fidelity plans to add loads to a few more of its funds, though Kramer could not say how many. ''I just know we won't stop at the three we have now,'' he said.
For now, indications are that Fidelity will be, if not alone, in a small group of former no-load fund companies adding front-end sales charges.
''I suspect there will be very few others,'' says Marshall B. Front, a partner at Stein Roe & Farnham and president of the No-Load Mutual Fund Association. As long as investors who want no-loads have a wide selection of good-performing funds to choose from, competitive pressures alone should be enough to keep the number of low-loads from expanding much further, Mr. Front believes.