Finance: What are Sales Charge and Sales Load?

A sales charge/sales load is a commission paid by a customer when they buy a mutual fund. The more you invest, the smaller the load %.

College and CareerPersonal Finance
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Finance and EconomicsTerms and Concepts
LanguageEnglish Language
Life SkillsFinance Definitions
Personal Finance
SubjectsFinance and Economics
Terms and ConceptsManaged Funds
Mutual Funds
Stocks

Transcript

00:26

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

00:31

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

00:35

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

00:39

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

00:44

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

00:48

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

00:53

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

00:58

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

01:02

started investing all thousand dollars with no Commission upfront but instead

01:07

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

01:12

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

01:16

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

01:22

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

01:28

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

01:33

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

01:38

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

01:42

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

01:46

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

01:49

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

01:53

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

01:59

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

02:05

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

02:09

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

02:13

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