What is the difference between front-end load and back-end load in mutual funds?

• A. Front-end load is charged when you buy shares; back-end load is charged when you sell.
• B. Front-end load is charged when you sell; back-end load is charged when you buy.
• C. Front-end load is a management fee; back-end is a performance fee.
• D. Front-end load and back-end load are both charged annually.

Answer: (A)

Front-end and back-end loads are about when a sales charge on a mutual fund is paid. A front-end load is charged at the time you buy shares, reducing the amount of your investment right away. A back-end load is charged when you sell shares, often as a contingent deferred sales charge that may decline the longer you hold the fund (and can disappear after a certain period). This timing distinction is the essential difference. Note that not all funds have loads—some are no-load and only carry ongoing expenses (the fund’s expense ratio). The other options mix up when the charge occurs or treat loads as ongoing fees, which isn’t accurate.