| |
The mutual fund industry has designed many different load structures. You usually get to make a choice about how to take your load, even within the same fund, because many load funds offer several different classes of shares.
Class A shares have a front-end load; Class B shares have a back-end load. Class C shares have small, if any, front or back loads, but they have a steady annual 12b-1, or level load.
The four types of mutual fund loads -- front-end, back-end, level and no-load -- are described here. Click on each tab to read the details.
Trying to decide between buying a load versus a no-load mutual fund? Read "Buying mutual funds: load or no-load?."
 |
Types of mutual fund loads |
|
|
|
|
Select one of the tabs to view the information on the types of mutual fund loads.
|
|
 |
Associated
with
Share Class A.
|
| |
| |
Definition
A fee you pay the day you buy the fund (usually 3 percent to 8 percent), stated as a percentage of the funds, and coming right off the top, before your money goes to work.
|
| |
| |
Advantages
Funds with front-end loads usually have lower 12b-1 fees (about 0.25 percent) and lower annual expenses than those without.
|
| |
| |
Disadvantages
Because the sales commission comes right off the top, the total amount you're investing is reduced. In other words, $5,000 invested in a no-load or back-load fund is $5,000 invested in the market. The $5,000 used to purchase a front-loaded fund is more likely to mean about $4,750 invested in the market, because $250 is deducted to pay the broker.
|
| |
| |
Beware
The way the percentage is stated is a little tricky. It's based on the full amount of your money, not the amount that actually gets invested. Say you have $100,000. You and your broker select a fund with a 6-percent front-end load. That means $6,000 comes right off the top, and only $94,000 goes into the mutual fund and begins earning returns. The $6,000 is 6 percent of $100,000. But $6,000 is 6.38 percent of the $94,000 you actually invested.
|
| |
| |
Tip: Check breakpoints
Some funds will reduce or even remove the front-end load for larger investments. Ask your broker if there is a breakpoint at which the load will disappear. If you have a substantial amount of money to invest (from $100,000 to $1 million or more), this great little fact could potentially make your load fund as good a deal as a no-load.
|
| |
| |
When to buy front-loaded funds
When you have enough money to hit the breakpoint and avoid the load.
When you're investing for the long-term. The relatively low annual fees can pay off over time.
When a broker or adviser you trust recommends one, and you feel comfortable about the commission she will earn when you buy it.
|
|
|
|
|
