Load fund can be defined as the type of the mutual fund that carries a fee to sell and purchase the shares of the company. This load can be expressed in the form of the percentage of the total amount invested by the company.
The working of the Load Fund
The load fund can be divided into two different categories these are the front end loads and the back end loads. A front end load is the type of fee that is used to pay when the investment is purchased and the back end load is the type of load fee that is paid when the investment is sold. A no load kind of mutual fund is the type of the fund that dint charge any fee for purchasing or selling the investment.
In order to understand the working of the load fund let’s take an example of an individual who wants to invest an amount of $10,000 in a certain company ABC’s mutual fund. Now assume that the load fund is 4 percent then for an investment of 10,000 dollars, 400 is paid for the frond end load fund and $9,600 is actually invested in the mutual fund of the company.
Instead if the fund instead has a 4% back-end load, then you must pay a $400 fee upon the sale of the investment ($10,000 x .04). Again, the earnings from the investment should ideally more than make up for the back-end load. In this example, the back-end loaded fund must therefore return 14% in one year to reach $11,000 in value after the fee.
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