Level LoadMutual Funds
Funds with a level load have both front and back end loads. Shares of this class are typically referred to as “C-share” for simplicity. You will be charged a front end load deducted from your initial investment. You will be charged a back end load on your withdrawal, and in between these loads you will be charged regular annual operating fees. That is just as expensive as it sounds. The front end load is lower than most front end load funds, and marketers will say this makes it inexpensive. However, these funds typically don’t reduce the back end load if you hold them for a long period of time. It compensates your fund’s management team for the reduced front end load. To finish, funds will often charge additional annual fees in exchange for the “favor” of splitting the load.
As an example, you invest $10,000 in a fund charging a 3% load for $300 fee and a $9,700 initial investment. You hold the fund until the investment reaches $14,000 several years later. You decide to withdraw your cash from the fund, and are charged an additional 3% withdrawal fee. Your investment would be reduced by $420 and you would receive $13,580. Your total paid in loads is $720. If you had been charged a 6% front-end load you would only have been charged $600 on the initial $10,000. To add insult to injury, the better the fund does the more you would pay on the back end. Keep in mind that your annual expenses may be higher while investing in these shares.
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