Some mutual funds have sales charges, others don’t. A load mutual fund does and charges you for the shares/units purchased plus an initial sales fee. This charge is typically anywhere from 4% to 8% of the amount you are investing or it can be a flat fee depending on the mutual fund provider. This is added to your purchase as a sales fee.
For example, if you invested $1,000 into a 5% load mutual fund, you would actually be investing only $950 with the remaining $50 going to the company as a commission.
Some load mutual funds charge the fee when you buy shares; others charge when you sell them. Brokerage firms and banks often sell load funds.
There are different types of load mutual funds:
Front-end load (usually class A shares) - you pay the sales fee up front.
Back-end load or deferred load (usually class B shares) - you pay the sales fee on your way out.
Constant load fund (usually class C shares) - you pay the sales fee every year and might even have to pay a full load when you sell.
Investor can determine whether a fund has loads or not by examining its prospectus.
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