The initial, or front-end, sales charge is a one-time deduction from an investment made into the fund. The amount is generally relative to the amount of the investment, so that larger investments incur smaller rates of charge. The sales charge serves as a commission for the broker who sold the fund.
Benefits
A fund’s potential fees and sales charges are an important factor to consider before making an investment. The load fee compensates the broker or financial planner for the service of providing professional investment advice. Sound advice is, of course, an investment itself, and one worth paying for.
Origin
This information is taken directly from the fund’s prospectus.
For the Pros
A fund may have a sliding-scale maximum initial sales charge of 5.50% that is reduced to 4.50% if 200,000 is invested and reduced to 3.50% if 400,000 is invested. Its minimum may be 0.50% if at least $5 million is invested. If 0% is listed, then the fund does not have a front-end sales charge.