Financial Glossary: Front-End Load


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Front-End Load

Front-End Load

A Commission or sales charge that has to be paid at the time of the initial purchase for an investment, usually mutual funds and insurance policies.

It is cut from the investment amount   resulting in lowering the size of the investment.

Front-end loads are paid to investment intermediaries (financial planners, brokers, investment advisors) as sales commissions. As such, these sales charges are not part of a Mutual Fund's operating expenses. It is argued that a load is a cost that investors incur for obtaining an investment intermediary's expertise in selecting appropriate funds for clients. It is a matter of record that load funds do not outperform no-load funds.

Generally, the sales charge on a load Mutual Fund Will be waived if such a fund is included as an investment Option in a retirement plan such as a 401(k).

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