A front-end load is best described as?

• A. A fee charged for selling shares.
• B. A management fee charged yearly.
• C. A performance fee based on returns.
• D. A front-end load is a sales charge paid when you buy a mutual fund.

Answer: (D)

A front-end load is a sales charge paid when you buy mutual fund shares. It’s taken out of your purchase upfront, so only part of your money actually goes into the fund. This fee compensates brokers who sell the fund. Because the charge reduces the amount invested, the fund starts with a smaller principal than your total cash. This is different from ongoing costs like the annual expense ratio or management fee, which are charged every year regardless of performance. It’s also different from a performance fee, which would be charged based on returns. Some funds have no front-end load, and others may impose a back-end (deferred) sales charge if you sell soon after buying.