How to Pay a Contingent Deferred Sales Charge

A contingent deferred sales charge, also known as a back-end load fee, is a charge that you pay when you sell shares of your mutual fund or stocks. Contingent means based on the number of shares you sell. Deferred means that you don't pay the charge upfront; you only pay when you sell shares, so the charge comes out of your total return. You can find the amount of any fees and how to pay a contingent deferred sales charge in your mutual fund prospectus.

Instructions

Difficulty: Moderately Easy

Things You’ll Need:

• Your mutual fund prospectus

Pay a Contingent Deferred Sales Charge

1. Open your prospectus to the heading 'Shareholder Fees' and look for the terms 'contingent deferred sales charge', 'back-end load' or 'back load'.
2. Find the percentage of the sales charge.
3. Figure your total investment. If you don't know this number, you can also find it in your prospectus or annual report.
4. Multiply your total investment or the amount you wish to withdraw by the percentage of the sales charge.

Avoid a Contingent Deferred Sales Charge

5. Look for a 'no-load' mutual fund before you invest. A no-load fund doesn't charge any additional fees.
6. Read your prospectus thoroughly, particularly the 'Shareholder Fees' section.
7. Look for a caveat to the contingent deferred sales charge. Many funds will not charge you the back-end load if you do not withdraw money before a certain length of time, such as one year.
8. Keep your money in the mutual fund for as long as possible. This allows it to continue to accrue returns while sometimes minimizing or eliminating the back-end load completely.

Tips & Warnings

• You may not have to pay a contingent deferred sales charge. If you own shares in a no-load fund, there will be no sales charge to deal with. If you own shares in a front-end load fund, you have already paid your fees. You can avoid paying the contingent deferred sales charge by buying shares in a no-load mutual fund or (sometimes) by following the stipulations of your mutual fund's rules about shareholder fees.
• Keep your tax advisor in the loop. Investing in mutual funds can have significant tax consequences. Make sure your tax planner knows about the investments you plan to make.
• Be certain to look carefully at any mutual fund prospectus you are considering to discover what kind of fees you must pay.
• Sales fees can reduce your overall returns considerably, particularly if you withdraw money early from the fund (penalty fee).