load fund
A mutual fund that charges a sales commission either when shares are purchased (front-end load) or sold (back-end load), paid to the broker who sold the fund.
Example
“The financial advisor recommended a load fund charging 5% upfront — meaning $500 of every $10,000 invested went to commissions.”
Memory Tip
LOAD fund = LOADED with fees. You pay a sales commission. No-load funds skip this.
Why It Matters
Understanding load funds helps investors recognize the true cost of their investments and make informed decisions about which funds to buy. These sales commissions can significantly reduce your investment returns over time, so knowing whether you are paying a front-end or back-end load is crucial for comparing different investment options and protecting your wealth.
Common Misconception
Many people assume that a load fund will perform better than a no-load fund because they are paying for professional management or premium service. In reality, the load is simply a sales commission that goes to the broker, and paying a load does not guarantee better investment performance or returns compared to no-load funds.
In Practice
Suppose you invest $10,000 in a front-end load mutual fund with a 5 percent load charge. You would immediately pay $500 in commission to your broker, leaving only $9,500 actually invested in the fund. If the fund later grows to $15,000, your total gain is $5,500, but you effectively started with less money working for you because of that initial commission cost.
Etymology
LOAD (burden, charge) FUND. A fund that comes LOADED with a sales charge.
Common Misspellings
Start investing with no commission trades
Related Terms
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See Also
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