How Does a Front Load on a Mutual Fund Work?

Video Transcript

"So how does a front-end load on a mutual fund work? The front-end load is, as it would imply, is taken upfront. So if you had a five percent front-end load and you put in 100,000 dollars, 5,000 dollars would go away immediately back to the mutual fund company. That's their...that's their sales cost. The difference between that and, say, a no-load fund is that you would put in that money and there would be no load upfront. There would be no...there would be no cost. There are other loads. There are B share and C share loans...loads, and those are taken after. So they're not taken upfront, but the payments on the loans...or loads are taken on the back end. So with a front-end load, you're going to pay all the fees, the commissions, everything will be taken care of immediately right off the top upfront. Conversely, if you have a back load fund, they will take the loads at the end after you've had the fund for a while. And of course, a no-load fund has no load associated with it."