What is Breakpoint?
How Does Breakpoint Work?
Let's assume you are interested in making a $10,000 load goes down to 3%.
Thus, of the $10,000 investment, $400 ($10,000 x .04) is paid to the company and $9,600 is actually invested in the fund as a result of less than $15,000. Ideally, the from the investment should more than make up for the load. In this example, the front-end loaded fund must return 14.6% in one year to reach $11,000 in value, but the must only return 10% to do so. The fund would not have to earn as high a return if the investor invests over the breakpoint.
Some many have more than one breakpoint. In some cases, an investor can sign a with the investment company, promising to invest a certain amount over time in order to qualify for the reduced load now. Additionally, some provide for a right of accumulation, which a lower load when the investment reaches a certain level over a certain time period.
Why Does Breakpoint Matter?
Loads discourage investors from frequently trading their
It is important to understand that a load is only one of several types of fees that may be charged. Thus, when comparing , investors should be careful to evaluate all fees associated with an , not just the size of the load. Additionally, the nature of the investment, the investor's risk tolerance, and the investor's time horizon should always be considered when evaluating any investment.