**Front-End Load vs. Back-End Load vs. Level Load**

By: Megan Makuck, Fall 2017 Student Intern

Load is simply an equally small and equally bland word for fees, which are attached to mutual funds, life insurance policies, or annuities. The load is a commission or sales charge generated from investing in a fund that goes to the middle man, a.k.a., your investment broker or financial adviser. The load compensates your adviser for his knowledge, research, and recommendations about which funds you should invest in. Loads can range anywhere from 3.75-5.75% of your investment amount. While some funds do not have any load, called a “no-load” fund, the rest have loads, which come in three different forms: front-end, back-end, and level loads.

**Front-End Load:**

The front-end leaves no mystery in its name. The load is applied to the initial investment. You give your advisor $10,000 to invest in a mutual fund. The load is 5%, so the advisor gets $500 and invests the remaining $9,500 into the fund.

**Back-End Load:**

The back-end load is applied to the investment amount when you redeem your funds. It is also sometimes called the contingent deferral sales charge because of how it functions. Back-end loads typically decrease each year you hold your fund until it eventually disappears. Seven years is a common amount of time required to hold funds before the back-end load percentage reaches zero. For example, let’s say a mutual fund has 5% back-end load. You invest $10,000 and pay no load upfront. After holding your mutual fund for one year, the back-end load has decreased to 4.5%. This pattern continues until the seventh year passes, and the back-end load is now at 0%.

**Level Load:**

The level load is a recurring fee applied to your funds on an annual basis. While you do not have to pay a fee upon your initial investment or redemption, this fee takes a fixed percent of your fund amount each year. For example, you invest $10,000 in a fund. No load is charged on the initial investment. At the end of the first year, your fund grows to $10,070. A 1% level load is taken from that fund in the amount of $100.70. At the end of the second year, the fund grows to $11,350. A 1% level load is taken from that fund in the amount of $113.50. This trend continues at the end of each year you hold this fund.

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