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Question: 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 does a front-end load mutual fund work?

A front-end load means the fee (generally between 3% and 6% of the investment, or sometimes a flat fee, depending on the provider) is charged upon purchase of the mutual 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.

When investing in mutual fund which is better front-end load or back-end load?

With rear-loaded shares, the full amount of your investment goes to work, but you can be charged a redemption fee if you sell shares too quickly. At first glance, the back-end load looks like the better deal, but you may be much better off paying the load up front.

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What are loads in mutual funds?

A load fund is a mutual fund that comes with a sales charge or commission. The fund investor pays the load, which goes to compensate a sales intermediary, such as a broker, financial planner, or investment advisor, for his time and expertise in selecting an appropriate fund for the investor.

Are load mutual funds worth it?

The load itself really isn’t bad, but paying the load is bad. Mutual fund companies make money from ongoing management expenses, whether it’s a no-load or load fund. While some things are worth paying more for, loads are completely unnecessary when it comes to buying a mutual fund.

What are the 6 types of mutual funds?

There are six common types of mutual funds:

  • Money Market Funds. Money market funds invest in short-term fixed-income securities.
  • Fixed Income Funds. Fixed income funds buy investments that pay a fixed rate of return.
  • Equity Funds. Equity funds invest in stocks.
  • Balanced Funds.
  • Index Funds.
  • Specialty Funds.

What is an advantage of buying a load fund?

Although load funds charge a commission, they are still preferred by some investors over no-load funds. Investors pay a commission to the financial intermediary that conducts research on the most appropriate mutual fund to invest in and makes an investment decision on behalf of the client.

Which type of fund would you expect to have the highest risk?

Equities have the highest potential return but also the highest risk. Treasury bills have the lowest risk but provide the lowest return. This is why diversification through asset allocation is important. Every investment comes with its own risks and market fluctuations.

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How do you tell if a mutual fund is no-load?

Every mutual fund has its own set of webpages that cover information about the fund including investment objectives, performance history and the fund’s fee structure. If no sales charge is listed — front-end or deferred — a fund is no-load.

What is the average fee for a mutual fund?

Mutual funds tend to carry higher expense ratios than ETFs because they require more hands-on management. The average expense ratio for actively managed mutual funds is between 0.5% and 1.0%. They rarely exceed 2.5%. For passive index funds, the typical ratio is about 0.2%.

What are front-end loads?

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.

What are load fees for mutual funds?

A load mutual fund charges you a sales charge or commission for the shares purchased. This charge could be a percentage of the amount you are investing in, or it can be a flat fee, depending on the mutual fund provider.

What is a disadvantage of buying a load fund?

The main disadvantage of a load fund is the attached charges and commissions. The costs diminish your investing power as they are deducted from your investment funds. For example, if you are buying mutual funds worth $1,000 and get a 5% load, the actual amount invested will be $950.

What is best for most investors load or no-load funds?

You should generally buy no-load funds if you don’t use an advisor, but perhaps the most important reason for buying no-loads is to boost your returns by minimizing expenses. In most cases, no-load funds have lower average expense ratios than load funds, and lower expenses generally translate into higher returns.

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Who determine the maximum load that a fund can charge?

The limit on maximum entry or exit load that a fund can charge is determined by the: SEBI. AMPI. Agents based on demand for the fund.

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