Back-End Loads

Back-end loads are a sales commission levied by some load funds when an investor sells mutual fund shares. These back-end loads typically are structured as a contingent deferred sales charge (CDSC), which often start at 5% or 6% of money withdrawn within a year of buying the fund and then decline by a percentage point or so each year until they disappear. Back-end loads usually are set to compensate the distributor for marketing and selling the fund, especially to protect anticipated annual flows of 12b-1 fees. However, back-end loads may also be used to dissuade short-term traders; funds may set a high back-end load for money withdrawn within a very short time frame and then revert to the more general schedule of yearly declining load amounts referenced above. Read the rest of this entry »