Front-Load / Back-Load Fees
Definition
Mutual fund sales fees charged differently. Front-load equals paid when you buy (8% upfront equals $10,000 investment only buys $9,200 of fund). Back-load equals paid when you sell (declining 5% year one to 0% year 6). No-load funds have neither.
Why It Matters
Front-load and back-load fees are terrible. They reduce returns, especially harmful to small investors. A $10,000 investment with 5% front-load starts behind $500 immediately. Use no-load or low-cost index funds instead.
Example
Invest $10,000 in a 5% front-load fund. Only $9,500 is invested. Invest same $10,000 in a no-load index fund. All $10,000 invested. Over 30 years at 7% returns, you lose $15,000+ to that initial fee.