A load fund is a mutual fund that levies a sales charge, or load, when shares are purchased and sometimes when they are redeemed. There are different structures, including front-end loads (charged at purchase), back-end loads (charged at redemption), and a contingent deferred sales charge (CDSC) that applies if shares are redeemed within a specified period. The charge is typically expressed as a percentage of the amount invested or the amount redeemed and reduces the net amount credited to the investor.
Load funds are designed to compensate broker-dealers and advisors who distribute the fund, with the charge often reflected in the fund's expense profile and the transaction paperwork. Investors should review the amount of the load, the timing, and any schedule of reductions or waivers before making decisions. In contrast, no-load funds do not impose sales charges, though they still incur ongoing expenses such as the fund's expense ratio. The term load thus signals the presence of a sales charge, not necessarily the overall cost, which also depends on ongoing expenses.
Example: An investor incurs a 4.5% front-end load when purchasing shares through a broker, reducing the amount invested.
Mutual fund · Front-end load · Back-end load · Contingent deferred sales charge (CDSC) · No-load fund · Expense ratio · Sales charge