Breakpoint

AAA

DEFINITION of 'Breakpoint'

For load mutual funds, 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.


INVESTOPEDIA EXPLAINS '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. Open-End Fund

    A type of mutual fund that does not have restrictions on the ...
  2. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected ...
  3. No-Load Fund

    A mutual fund in which shares are sold without a commission or ...
  4. Breakpoint Sale

    The sale of a mutual fund at a set dollar amount that allows ...
  5. Back-End Load

    A fee (sales charge or load) that investors pay when selling ...
  6. Front-End Load

    A commission or sales charge applied at the time of the initial ...
Related Articles
  1. 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.
  2. Retirement

    The ABCs Of Mutual Fund Classes

    Do you understand how the various types of shares differ? We give you the pros and cons of each.
  3. Mutual Funds & ETFs

    Mutual Fund Basics Tutorial

    Learn about the basics - and the pitfalls - of investing in mutual funds.
  4. Mutual Funds & ETFs

    What types of fees are incurred by purchasing ETFs?

    Understand all the various costs, both explicit and hidden, involved in trading exchange-traded funds, or ETFs, and see how their costs compare to fund trading costs.
  5. Mutual Funds & ETFs

    What does a hedge fund do?

    Read how hedge funds differ from other investment vehicles and how their investment strategies make them unique and potentially risky.
  6. Mutual Funds & ETFs

    What ETFs can I buy that track the telecommunication sector?

    Get information about some of the most popular and highly traded ETFs that investors use to track the telecommunications market sector.
  7. Mutual Funds & ETFs

    Should I invest in ETFs or index funds?

    Learn advantages to investing in exchange-traded funds, or ETFs, and index funds, and decide whether to include them in your investment portfolio.
  8. Investing Basics

    What does the end of the quarter mean for portfolio management?

    Take a deeper look at why the end of a financial quarter, and all of its accompanying reports, is a significant event for portfolio management.
  9. Pimco has stabilized its Total Return fund, but its returns are still shaky and its sales load is still a fat one.
    Professionals

    A Look At Pimco's Total Return Fund Post-Gross

    Pimco has stabilized its Total Return fund, but its returns are still shaky and its sales load is still a fat one.
  10. 10 equity mutual funds bargains for any investor or financial advisor.
    Professionals

    10 Equity Mutual Fund Bargains

    10 equity mutual funds bargains for any investor or financial advisor.

You May Also Like

Hot Definitions
  1. Christmas Tree

    An options trading strategy that is generally achieved by purchasing one call option and selling two other call options at ...
  2. Christmas Club

    A short-term savings account that usually pays out the full account balance to its account holders once each year, right ...
  3. Boston Snow Indicator

    A market theory that states that a white Christmas in Boston will result in rising stock prices for the following year. For ...
  4. Christmas Island Dollar

    The former currency of Christmas Island, an Australian island in the Indian Ocean that was discovered on December 25, 1643. ...
  5. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  6. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
Trading Center