The front end load is a sales commission charged against your investment into a fund. Your investment will be reduced by this expense, since a Front End Load ranges anywhere from 0% up to 8.5%. This fee is distributed to the brokerage, advisor, or financial planner who referred you to the fund, other marketing fees, the company who manages the fund, and potentially other parties. The rest of the cash is invested directly into the fund. A fund carrying a front end load is typically referred to as an “A-share class” for simplicity.

If you are investing into a fund and charged a 3% load, 97% of your money will go into the investment. As an example, if you were investing $10,000 you would lose $300 to the load, and $9,700 would be invested into the fund. Your investment would have to return the initially lost $300 for you to break even, exceed any other expenses, and then deliver a rate of return higher than the market. Higher front end loads and annual expenses equal higher performance barriers. Some mutual funds will decrease the front end load if you invest a larger amount of money, staggering the amount you may pay for your entry fee. Very rarely, funds may eliminate them completely. Investing higher amounts will make sense if your mutual fund allows you to pay lower front end loads.

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