Allocation Rate

AAA

DEFINITION of 'Allocation Rate'

The percentage of an investor's initial cash or capital outlay that actually goes toward the final investment. This amount is net of any fees that may be incurred upon initial investment and is effectively the amount that is exposed to the investment.

INVESTOPEDIA EXPLAINS 'Allocation Rate'

For example, if a mutual fund carries a 4% front-end load, only 96% of an investor's initial investment will actually be placed into the fund itself, with the rest going to the investment company. The higher the fees, the lower the overall allocation rate will be for the investor.

Management companies, pension managers and the like all charge some percentage fee for their services. More choices usually means higher allocation rates for investors, but buyers must always beware of exorbitantly high load fees or upfront costs for any investment. Stock and bond index funds remain one of, if not the highest, allocation rate vehicles available to investors who do not wish to actively manage their own portfolios.

RELATED TERMS
  1. Commission

    A service charge assessed by a broker or investment advisor in ...
  2. Front-End Load

    A commission or sales charge applied at the time of the initial ...
  3. Load Fund

    A mutual fund that comes with a sales charge or commission. The ...
  4. Load

    A sales charge or commission charged to an investor when buying ...
  5. Compound Annual Growth Rate - CAGR

    The year-over-year growth rate of an investment over a specified ...
  6. Return On Investment - ROI

    A performance measure used to evaluate the efficiency of an investment ...
Related Articles
  1. How To Pick A Good Mutual Fund
    Mutual Funds & ETFs

    How To Pick A Good Mutual Fund

  2. Don't Let Brokerage Fees Undermine Your ...
    Options & Futures

    Don't Let Brokerage Fees Undermine Your ...

  3. The Rap On Wrap Fees For Retirement ...
    Options & Futures

    The Rap On Wrap Fees For Retirement ...

  4. Mutual Fund Basics Tutorial
    Mutual Funds & ETFs

    Mutual Fund Basics Tutorial

comments powered by Disqus
Hot Definitions
  1. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
  2. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  3. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  4. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  5. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  6. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
Trading Center