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Breakpoint

A predetermined contribution amount in a mutual fund making the investor eligible for a reduction in sales charges. Mutual Funds are required to give a description of these breakpoints and the eligibility requirements in their fund prospectus. It is prudent for investors to be aware of these.

Notes:

An example of breakpoints on a front-load mutual fund would be a charge of 6.25% on investments of less than $25,000, a charge of 5.5% on sales of $25,000 to $99,999 and 4.75% on investments above $100,000.

By reaching or surpassing a breakpoint, an investor will face a lower sales charge and save money.

See also: Back End Load, Breakpoint Sales, Front-End Load, Letter of Intent, Mutual Fund, No Load Fund, Open End Fund

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Breakpoint

For mutual funds, the point at which the amount invested reduces the sales charge is called the "breakpoint." Each mutual fund may have several breakpoints; the larger the investment, the greater the discount. Note that the actual reduction in the sales charge is known as the "breakpoint discount". Also, the term "breakpointing" is sometimes used to refer to the offering of breakpoint discounts. The practice of soliciting mutual fund purchases just below the breakpoint (to earn more commissions) is considered unethical and in violation of NASD rules. See: right of accumulation.

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breakpoint

The cumulative level of purchases of shares in a mutual fund that is required before an individual purchaser can qualify for a reduced sales commission. Compare letter of intent. See also right of accumulation.