What Are Mutual Fund Loads?

Question: What Are Mutual Fund Loads?

You may have seen the term 'load' associated with mutual funds. Loads are fees charged to the investor when buying or selling certain types of mutual funds.

Answer:

There are four types of loads:

1. Front-end loads are charged up front (at the time of purchase) and average around 5% but can be as high as 8.5%. For example, if you invest $1,000 with a 5% front load, the load amount will be $50.00 and therefore your initial investment will actually be $950.
2. Back-end loads, also called contingent deferred sales charges, are charged only when you sell a back-loaded fund. These charges can also be 5% or more, but the load amount typically declines over time and can be reduced to zero after a certain number years.
3. Load-waived funds are funds that normally charge a load but waive it if there is some qualifying circumstance, such as purchases made within a 401(k) plan.
4. No-load funds do not charge any loads. This is the best type of fund to use because minimizing fees helps maximize returns.

When researching mutual funds, you can identify the load types by the letter 'A' or 'B' at the end of the fund name. Share class A funds are front-loaded funds and share class B are back-loaded funds. Sometimes the load-waived funds have the letters 'LW' at the end of the fund name. Once again, be sure to look for no-load funds. A few good no-load mutual fund companies include Vanguard, Fidelity and T. Rowe Price.