Legal Definitions - load fund

A load fund is a type of mutual fund that charges a commission when shares are purchased or redeemed. The commission usually ranges from 4 to 9%. There are two types of load funds: front-end load and back-end load.

• Front-end load: A mutual fund charges a 5% commission when an investor buys shares. If an investor invests $1,000, $50 will be deducted as a commission, and the remaining $950 will be invested in the fund.
• Back-end load: A mutual fund charges a 6% commission when an investor sells shares within the first year of purchase. If an investor sells $1,000 worth of shares, $60 will be deducted as a commission, and the remaining $940 will be returned to the investor.

These examples illustrate how load funds charge a commission, which reduces the amount of money an investor can invest in the fund. This commission is paid to the broker or financial advisor who sells the fund to the investor.