Breakpoint

What is 'Breakpoint'

Breakpoint, for load mutual funds, is the dollar amount for the purchase of the fund's shares that qualifies the investor for a reduced sales charge (load). The purchase may either be made in a lump sum or by staggering payments within a prescribed period of time. The latter form of investment purchase in a fund must be documented by a letter of intent.


BREAKING DOWN 'Breakpoint'

For example, suppose that an investor plans to invest $95,000 in a front-end load mutual fund and faces a sales charge of 6.25%, or $6,125. If a breakpoint of $100,000 exists with a lower sales charge of 5.5%, the investor should be advised to invest an additional $5,000. If the investor can add another $5,000 to the investment, he or she would benefit from a lower breakpoint sales charge of $5,500, or a savings of $625 on this transaction.

Mutual funds are required to give a description of these breakpoints and the eligibility requirements in the fund prospectus. By reaching or surpassing a breakpoint, an investor will face a lower sales charge and save money. Any investor purchase of fund shares that occurs just below a breakpoint is considered unethical and in violation of NASD rules.

RELATED TERMS
  1. Breakpoint Sale

    The sale of a mutual fund at a set dollar amount that allows ...
  2. Rights of Accumulation - ROA

    A right that allows a shareholder to receive reduced sales charges ...
  3. Front-End Load

    A commission or sales charge applied at the time of the initial ...
  4. No-Load Fund

    A mutual fund in which shares are sold without a commission or ...
  5. Load Fund

    A mutual fund that comes with a sales charge or commission. The ...
  6. Sales Charge

    A commission paid by an investor on his or her investment in ...
Related Articles
  1. Professionals

    Breakpoints

    FINRA/NASAA Series 66 Section 1 - Breakpoints. In this section breakpoints, letters of intent (LOI) and rights of accumulation.
  2. Professionals

    Reduced Sales Charges/Quantity Discounts

    Breakpoints A mutual fund company's scale of declining sales charges based on the amount invested is called the fund's breakpoint schedule. Below is an example of a breakpoint schedule ...
  3. Mutual Funds & ETFs

    Lower Your Fees With Mutual Fund Breakpoints

    The lower the sales charge you pay, the greater your returns. Find out how to cash in.
  4. Professionals

    Mutual Fund Analysis

    Mutual Fund Analysis
  5. Professionals

    Mutual Fund Classes, Sales Charges and Expenses

    Mutual Fund Classes, Sales Charges and Expenses. In this section Share Classes (class A, B and C) and sales charges and expenses.
  6. Mutual Funds & ETFs

    The ABCs of Mutual Fund Classes

    There are three main mutual fund classes, and each charges fees in a different way.
  7. Professionals

    Mutual Fund Management

    Management Fees
  8. Investing Basics

    Explaining Front-End Load

    A front-end load is a commission or sales charge paid by the investor at the initial purchase of an investment.
  9. Mutual Funds & ETFs

    How Mutual Fund Companies Make Money

    Read about the many different kinds of fees and sales charges mutual fund companies can use to generate revenue from those who invest in their shares.
  10. Professionals

    Mutual Fund Pricing

    FINRA/NASAA Series 66 Section 1 - Mutual Fund Pricing. In this section net asset value, sales charges, 12b-1 Fees and No-Load.
RELATED FAQS
  1. In which of the following ways can investor qualify for a breakpoint ...

    The correct answer is c): A breakpoint allows an investor to qualify for a reduced sales charge based on the purchase size ... Read Answer >>
  2. What are the best ways to lower my investing fees?

    Lower your investing fees by buying index funds or ETFs, choosing the right mutual fund share class, evaluating breakpoints ... Read Answer >>
  3. What's the difference between a load and no-load mutual fund?

    A mutual fund is simply a large group of people who lump their money together for a management company to invest. And, like ... Read Answer >>
  4. Is it better to buy A-shares or a no-load mutual fund?

    Understand the difference between Class A mutual funds and no-load funds, and learn which option for mutual fund investing ... Read Answer >>
  5. How do no-load funds typically perform relative to load funds?

    Understand the difference between no-load mutual funds and funds that carry a sales load, and learn which of the two has ... Read Answer >>
  6. What do the different types of mutual fund classes mean?

    When checking for different quotes on mutual funds, you might see different prices for classes of mutual fund shares that ... Read Answer >>
Hot Definitions
  1. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  2. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  3. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  4. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  5. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  6. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
Trading Center