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Front-End Load

A front-end load is a fee associated with the purchase of certain investments, including mutual funds, annuities, and life insurance. This type of fee is a sales charge, or commission, that is paid upfront by the investor at the point of purchase. The percentage of the front-end load varies among different investment companies, but usually falls between 3.75% to 5.75%.

Front-end loads are generally not an attractive option for the investor since the amount of the fee can significantly reduce the amount of capital that can be used to purchase the investment. Furthermore, the front-end load may not apply if the investor holds the investment to the end of the specified holding period. Additionally, front loaded investments may be subject to early redemption fees and charges, making them difficult to sell before the holding period ends.

Despite its drawbacks, a front-end load can be beneficial in certain circumstances. For example, a front-end-loaded fund may have lower ongoing fees and expense ratios than a fund without a front-end load. This can result in a higher rate of return for investors willing to hold the investment for the long term.

In conclusion, a front-end load is a sales charge or commission that an investor pays upfront upon the purchase of certain investments. This fee must be taken into account when weighing the pros and cons of different investments. Although these fees can significantly reduce the amount of capital available to the investor, they may also result in lower fees and expense ratios over the life of the investment, which can potentially lead to higher returns.

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