Understanding Back-End Loads in Mutual Funds: A Comprehensive Guide

A back end load is a fee paid by investors who sell their mutual fund shares within a defined period. A financial intermediary collects this fee, and it is not a part of the regular operating expenses of the fund.

A back end load typically applies to class-B mutual fund shares that are sold within 5 to 10 years, depending on the defined period. Over the course of the defined period, this charge will decrease annually until the holding period is over. The fee is set at a certain percentage of the value of the share and gradually decreases each year of the holding period. If a mutual fund is not sold during the specified time frame, there is no fee.