What is front end and back-end load?

What is front end and back-end load?

A front-end load is a commission or sales charge applied at the time of the initial purchase of an investment. The opposite of a front-end load is a back-end load, which is paid by deducting it from profits or principal when the investor sells the investment.

Which is better front end load or back-end load?

In a front-end load fund, part of the fee is a commission you pay when you make the investment—on the front end. In a back-end fund, you pay commission when you take your money out of the fund. There are also no-load funds in which you pay no commission. No-load funds might seem more attractive.

How is back-end load calculated?

Calculation. Where: Back-End Fee = Investment Value at Sale x Back-End Load.

What is a front end load on a mutual fund?

An upfront sales charge investors pay when they buy fund shares. It generally is used by the fund to compensate brokers. A front-end load is deducted from the purchase and reduces the amount available to buy fund shares.

How do you calculate front end load and back-end load?

Front-End Load

  1. Calculation. Net Investment = Initial Investment – Front-End Fee.
  2. Explanation. Also known as a front-end fee or sales charge, a front-end load is a fee or sales commission paid to agents such as stockbrokers and financial advisors.
  3. Example.
  4. Related Terms.

What is a back-end load on a deferred annuity?

A back-end load is defined as a commission or sales fees that investors pay when they sell their investments. Back-end load is commonly associated annuities and mutual funds, an investor selling a mutual fund is required to pay a percentage of the value of the investment being sold as the back-end load.

What are backend fees?

A back-end load is a fee paid by investors when selling mutual fund shares, and it is expressed as a percentage of the value of the fund’s shares. A back-end load can be a flat fee or gradually decrease over time, usually within five to ten years.

What is a back end load fund?

A back-end load, also known as a contingent deferred sales charge, means the fee is charged when an investor redeems the mutual fund. The fee usually starts at 5% for investors who redeem shares within a year and declines by a percentage point each year after until the fee is eliminated.

Do load funds outperform no-load funds?

No-load mutual funds have no or low fees while load funds have a sales charge or commission attached. You can purchase no-load funds directly from the company or through a brokerage firm but load funds are sold through an adviser. Some studies show that no-load funds outperform load mutual funds.

What is a back end load fee?

What is a back load fund?

What are back-end load fees?