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. Breakpoint Sale

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

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

    A commission or sales charge applied at the time of the initial ...
  4. Letter of Intent - LOI

    1. An agreement that describes in detail a corporation's intention ...
  5. Open-End Fund

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

    An investment vehicle that is made up of a pool of funds collected ...
Related Articles
  1. Lower Your Fees With Mutual Fund Breakpoints
    Mutual Funds & ETFs

    Lower Your Fees With Mutual Fund Breakpoints

  2. The ABCs Of Mutual Fund Classes
    Retirement

    The ABCs Of Mutual Fund Classes

  3. Mutual Fund Basics Tutorial
    Mutual Funds & ETFs

    Mutual Fund Basics Tutorial

  4. Human Capital, An Important Asset For ...
    Investing Basics

    Human Capital, An Important Asset For ...

comments powered by Disqus
Hot Definitions
  1. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  2. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  3. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  4. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  5. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
  6. Limit-On-Open Order - LOO

    A type of limit order to buy or sell shares at the market open if the market price meets the limit condition. This type of ...
Trading Center