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Finance: What is a Back End Load? 1 Views

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What is a Back End Load? A back end load is a sales fee that is paid on a mutual fund after it’s sold (on the back end). Sometimes it’s a set amount and other times it’s an amount that continually decreases, so if the fund is held long enough, the fee drops away.

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Transcript

00:00
Finance a la shmoop... what is a back-end load? ok people there has to be a diaper
00:08
joke in here somewhere doesn't their nappies maybe okay nevermind spoil [Baby boy wearing a nappy]
00:12
sports you people are no fun.. back end load refers to the commission charged
00:16
when an owner of a mutual fund sells their mutual fund shares you know way
00:20
less jokey the back end load is structurally a different type of share

00:25
called a B-share and yes we have an opus video on the term you should check
00:30
it out so why would you choose a back-end load over a front-end load well
00:35
if you pay your commission on a thousand dollars invested to you know start out
00:40
on your mutual fund investing sojourn well you start your compounding there
00:44
within a safe 970 dollars after having paid the three
00:48
percent commission there you compound away on a lower starting nut than you [Front end load calculations]
00:53
would have had you paid your commission at the end the problem well say you held
00:58
the fund 15 years you started with a grand ie not nine seventy because
01:03
there was no commission when you became an owner of the shares of the fun you're
01:07
gonna do the B shares take the back end load and after 15 years that grant
01:11
doubled three times to become two then four then eight grand in value now you
01:15
pay a commission is it three percent still well in some funds it might be so
01:20
then you're paying three percent on eight grand or a total commission of two
01:23
hundred forty dollars instead of the thirty bucks you could have paid upfront
01:28
have you just bitten the bullet in the beginning and bought a shares [A and B share commission value]
01:31
well tons of gimmicks crawl around out there when you're buying mutual funds [Ants crawling through cracks on the floor]
01:35
hoping to get you to pay up for the brokers right? brokers got to live but
01:39
well you just got to understand what you're being sold and some of those
01:42
brokers well they have babies at home and you know they need to pamper them [man holding a diaper]
01:47
with back-end loads
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