ShmoopTube

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finance a la shmoop what are sales charges and sales loads sales charges or

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loads as they're lovingly called in the industry are just commissions customers

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pay when they buy mutual funds but because there are so many ways in which [People dealing out cash]

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to pay these commissions or at least in the way they get calculated they become

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a whole trivia contest catalog on their own in the good old days things were [People playing a trivia contest gameshow]

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simpler mutual funds were paid in a load up front like you bought a thousand [Stacks of cash appear]

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dollars worth of a mutual fund paid 50 bucks for the privilege and then the

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professionals you hired went to work with your remaining nine hundred fifty

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bucks to make it you know grow but then came break points basically volume

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discounts as they apply to the pricing of those commissions the more you invest

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a smaller the percentage you pay in Commission then came quote no-load

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unquote funds which instead of charging say five percent upfront and then

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investing that nine fifty under a fee structure of one percent a year they

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started investing all thousand dollars with no Commission upfront but instead

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customers would pay two percent of your commission so over time if mutual fund

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buyers held that fund five years or more while they paid more than they would

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have even in the most onerous of upfront a share load situations yeah not good no [Load comparisons appear]

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low doesn't mean no commission or fee or sales charge it's just marketing stuff

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for gullible consumers who bought it so why is it called the load anyway well [Person purchasing item from checkout]

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the Commission itself detracts from the total amount of capital being invested [Commission cash taken from capital]

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which then has to grow and presumably beat the market or you just buy an index

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fund right well if a mutual fund investment house isn't in fact beating [Man and woman fighting in martial arts]

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the market then mathematically there's no reason to buy the fund because

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investors can simply buy the market in investing in those index funds or ETFs [Man discussing investments with index funds or ETFs]

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or exchange-traded funds yeah so the load is essentially rocks in your

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backpack or a natural headwind against the sales of that mutual fund they feel [Man on a boat with a headwind]

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like a heavy load if you're ascending mutual fund mountain

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with the 18 rocks there in your Patagonia pack and it's probably no [Man sweating with backpack full of rocks]

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surprise that mutual fund mountain is Disney's least popular ride

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