Load fund


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Related to Load fund: No load fund

Load fund

A mutual fund that sells shares with a sales charge-typically 4% to 8% of the net amount indicated. Some no-load funds also levy distribution fees permitted by Article 12b-1 of the Investment Company Act; these are typically 0. 25%. A true no-load fund has neither a sales charge nor a distribution fee.

Load Fund

A mutual fund that charges shareholders a sales charge or commission. The charge, or load, pays the person(s) who sold the investor shares in the fund. There are three types of load fund. A front-end load means that the shareholder pays the fee when buying into the fund, while a back-end load means that he/she pays when selling his/her shares. Finally, an investor with a level-load fund pays periodically throughout his/her time as a shareholder. Studies have shown that load funds perform neither better nor worse than no-load funds.

load fund

A mutual fund with shares sold at a price that includes a sales charge—typically 4 to 9.3% of the net amount invested. Thus, load funds are sold at a price exceeding net asset value, but they are redeemed at net asset value. There is no reason to expect an investment company with a sales charge to outperform one without a sales charge. See also load, low-load fund, no-load fund.
Case Study Mutual fund distributors sometimes offer two, three, or four classes of shares for the same fund. Fund classes differ with regard to the fees charged to investors who purchase and own the shares. Class A shares typically entail a sales charge that ranges between 3% and 6%, while class B shares for the same fund entail a higher annual fee plus a redemption charge, or exit fee, in place of an initial sales charge. The redemption fee generally declines the longer shares are held before being redeemed. A third class of mutual fund shares may have no sales or redemption charge, but entail a higher annual fee. One major brokerage firm offers an aggressive growth fund with the following charges:
ClassABC
Initial Sales ChargeUp to 5.00%, reduced for large purchases; no charge for purchases over $1 millionNone1.00%
Deferred Sales Charge1.00% on purchases over $1 million or more if redeemed within one year of purchaseUp to 5.00% with reduction over time; no deferred charge after six years1.00% if redeemed within one year
Annual Distribution Fee0.25% of average daily assets1.00% of average daily assets1.00% of average daily assets

Individuals who invest a substantial amount of money and expect a long holding period are generally better off choosing class A shares because the lower annual expenses will, over time, more than offset the initial sales charge. In addition, investors who purchase a substantial number of shares often qualify for a reduced sales charge. In summer 2001 one major brokerage firm instructed its brokers to limit sales of class B shares to clients who invested $100,000 or less.

Load fund.

Some mutual funds charge a load, or sales commission, when you buy or sell shares or, in some cases, each year you own the fund. The charge is generally figured as a percentage of your investment amount.

Most load funds are sold by brokers or other investment professionals. The sales charge compensates them for their time.

In contrast, no-load funds, which don't have sales charges but may levy other fees, are usually sold directly to the public by the investment company that offers the fund. Some companies offer both load and no-load versions of the same fund.

References in periodicals archive ?
(24) During the 1990s, "funds became the primary investment vehicle of the average American investor." (25) By 2002, the share classes of nearly all load funds were sporting 12b-1 fees.
The overall performance record of a good load fund can offset the absence of a sales charge in a mediocre no-load fund.
Disadvantage: A load fund costs more because the investor must pay a sales commission.
Those with higher levels of education tended to agree less with the following statements: "My brokerage firm is equally interested in small investment accounts and large investment accounts." r = -.076, p < .05 "If an available no-load fund outperforms a load fund that is offered by the broker, the broker will recommend the better performing product." r = -.094, p < .05 "My broker recommends a fully invested posture." r = -.100, p < .01
Expense ratios are more negatively correlated with load fund redemptions than with no-load redemptions.
Return distributions of the no-load fund group and the load fund group are compared against one another to determine which would be preferred (i.e., in the efficient set).
Today, an investor who buys a load fund has to decide among front-end load funds, back-end load funds, funds with 12b-1 fees, funds with 12b-1 fees and declining redemption fees and so forth.
Ippolito finds that "load funds generally earn sufficiently higher rates of return compared with no-load funds to pay for the extra charges" (1989, p.
To appreciate the significance of the CDSCs' development and the competitive pressures CDSCs have exerted, it is necessary to understand how selling effort is compensated for load funds. For a load fund, a sales charge or "load," such as 6% of the amount invested, would be deducted directly at the time of sale and used to compensate the sales representative and the selling organization.
Of all the justifications offered for allowing the use of fund assets to pay marketing costs, the one ringing most true, circa 1978, was the SEC staff's suggestion that a fund marketing system relying on the assessment of high sales loads "is no longer viable because investors are increasingly unwilling to pay a high entrance fee." (204) In other words, in the face of an increasingly sophisticated, price-conscious marketplace, load fund marketers were seeing their customer base eroded by the no-load option.
Before Rule 12b-1, the no-loads competed straight up with the load funds; loads typically were charged at the time of sale, with a smattering of funds featuring redemption fees.
The same pessimism applies to any SEC efforts to clean up revenue sharing, the mutual fund industry's "dirty little secret." (461) This shady practice, featuring massive payments often unsupported by written contracts, pumps huge amounts of cash into the broker-dealer community over and above compensation from load fund commissions or 12b-1 fees.