Sales Load

What Is a Sales Load?

A sales load is a fee charged when you buy, sell, or hold certain mutual fund shares. The money generally goes to the broker, financial advisor, or firm that sold the fund, compensating them for distributing it. Funds that charge this fee are called load funds, while funds that do not are called no-load funds. A sales load is separate from a fund's ongoing operating costs, which are summarized as an expense ratio.

How Sales Loads Work

Loads take several forms. A front-end load is deducted from your investment at the time of purchase. Shares are typically priced at the net asset value plus the front-end load, so only the remainder is put to work in the fund. If a fund charged a front-end load on a $1,000 purchase, a portion of that amount would never be invested. Many funds reduce this charge for larger purchases through breakpoint schedules.

A back-end load, often called a contingent deferred sales charge, is paid when you sell shares. Its size typically shrinks the longer shares are held and may eventually reach zero. A level load instead applies a smaller charge every year. Front-end loads can be expressed with a simple relationship:

Net Amount Invested = Purchase Amount − Front-End Load

Why It Matters to Investors

A load reduces the amount of your money working in the fund, or the proceeds you receive when you sell, so it can affect long-term results. Investors often compare load and no-load options alongside other costs, such as the 12b-1 fee, a yearly distribution charge that some funds include in their expense ratio. The exact load structure is described in the fund's prospectus, which is the primary source for current terms. Loads are only one cost among many and do not by themselves indicate how well a fund will perform. Because fee schedules differ and can change over time, reviewing the prospectus is the standard way to see a fund's full cost structure.