Breakpoint

  

Waltz into a store willing to spend a lot, and you can usually expect a discount or a freebie. The more you spend, the more discounts stores are usually willing to pile on to keep you buying.

It works the same way with mutual funds. Buyers of mutual funds can get discounts once they get past breakpoints (the minimum levels where certain discounts are activated). Go past a certain breakpoint, and the commission on the buy might be slashed by 1%. Go above another breakpoint, and the commission will go even lower, or disappear entirely.

Example.

Buying shares of One Eyed Man Mutual Fund Company's flagship fund might cost 5.5% commission if you buy less than $25,000 worth. If you buy $500,000 worth of the fund, the commission might just be 1%. Over a million bucks, the commission might be free—the broker will be paid out of the management fee of the company, i.e. One Eyed.

Related or Semi-related Video

Finance: What is a Breakpoint?28 Views

00:00

Finance a la shmoop what is a break point?

00:05

well waltz into a store willing to buy a lot and you can usually expect a [Man in a store holding stack of cash]

00:10

discount or a freebie well the more you spend the more discounts stores are

00:14

usually willing to pile on keep you buy-in and it works the same way with

00:18

mutual funds buyers of mutual funds can get discounts once they get past break

00:23

points like the minimum level where certain discounts are activated go past

00:28

a certain break point and the commission on the buy might get slashed by a

00:31

percent go above another break point and the commission will go even lower or [Bar rises above break points]

00:36

disappear entirely..... buying shares of one-eyed man mutual fund company's

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flagship fund might cost you commission of 5.5 percent if you buy

00:50

less than twenty five grand worth but if you buy five hundred thousand dollars

00:55

worth of that mutual fund well, then the commission might be just one percent

00:58

by over a million bucks and the commission might be free the broker will

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be paid out of the management fee of the company over time ie one-eyed pays the

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broker so yeah very important not to confuse a break point with this...That did [People watching Point Break movie]

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not win the Academy Award

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