What is a "load" fund?

What is a "load" fund?

A load, when it relates to a mutual fund, is really a sales charge. It is the commission that's being paid back to the brokerage firm for selling you into a mutual fund. There are three main types of loads. There's a front-end load which is just a certain percentage (let's say three to five percent of your initial investment amount) that's going to be paid back to the brokerage firm. Then there's a back-end load that usually decreases over time. That load might start as high as seven percent and go down over the years. If you sell out of the fund before that load goes away then you're going to payout a charge for leaving. The last type of load is an ongoing sales charge and that's typically three-quarters of a percent to one percent which is paid every single year on that investment back to the institution. That is, it's really involved with your securities. What's interesting is no one of these loads is necessarily better than the other. It really is a process of how much money you're investing, how long you're going to be in an investment and what your overall strategy is, on which load might be better or worse for you.