Load Fund
A load fund is a type of mutual fund that comes with a sales charge or commission, which investors pay either at the time of purchase (front-end load) or when they sell their shares (back-end load). This fee is typically used to compensate financial advisors and brokers for their services in managing and recommending the fund. The load can vary but is usually a percentage of the investment amount. For example, if you invest 50 will go towards the sales charge, and the remaining $950 will be invested in the fund. Load funds are often contrasted with no-load funds, which do not have these sales charges. The idea behind load funds is that the expertise and guidance provided by financial advisors can potentially lead to better investment decisions and higher returns, although this is not always guaranteed.
What is a Load Fund?
A load fund is a mutual fund that includes a sales charge or commission, which investors pay either at the time of purchase (front-end load) or when they sell their shares (back-end load).
How Does It Work?
The sales charge is typically a percentage of the investment amount and is used to compensate financial advisors and brokers for their services. For instance, with a 5% front-end load on a 50 goes to the sales charge, and $950 is invested in the fund.
Types of Load Funds
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Front-End Load: Fee paid at the time of purchase.
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Back-End Load: Fee paid when shares are sold.
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Level-Load: Ongoing annual fees.
Comparison with No-Load Funds
Load funds are often compared to no-load funds, which do not have sales charges. The main selling point of load funds is the professional advice and potential for better investment decisions, though this is not always a guaranteed outcome.