Breakpoint Sale

AAA

DEFINITION of 'Breakpoint Sale'

The sale of a mutual fund at a set dollar amount that allows the fundholder to move into a lower sales charge bracket. If, at the time of investment, an investor is unable to come up with the funds needed to qualify for the lower fee, he or she can sign a letter of intent promising to reach the total amount, or breakpoint, in a set time period.

Any sales that occur just below a breakpoint are considered unethical and in violation of FINRA (formerly the NASD) rules.

INVESTOPEDIA EXPLAINS 'Breakpoint Sale'

An example of a breakpoint sale would be when an investor plans to invest $95,000 in a front-load mutual fund and faces a charge of 6.25% or $6,125. If the investor is properly advised, he or she will be told that adding $5,000 for a total investment of $100,00 will qualify the sale fro a lower sales charge of 5.5%, or $5,500. This means that the investor will essentially have $5,625 more invested than the initial purchase plan due to the savings in sales charges.

RELATED TERMS
  1. Letter of Intent - LOI

    1. An agreement that describes in detail a corporation's intention ...
  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

    For load mutual funds, the dollar amount for the purchase of ...
  5. Financial Industry Regulatory Authority ...

    A regulatory body created after the merger of the National Association ...
  6. Back-End Load

    A fee (sales charge or load) that investors pay when selling ...
Related Articles
  1. Mutual Fund Tune-Up Delivers High-Powered ...
    Mutual Funds & ETFs

    Mutual Fund Tune-Up Delivers High-Powered ...

  2. Mutual Fund Basics Tutorial
    Mutual Funds & ETFs

    Mutual Fund Basics Tutorial

  3. Will ETFs Eventually Replace Mutual ...
    Mutual Funds & ETFs

    Will ETFs Eventually Replace Mutual ...

  4. Understanding The Bond Behemoth That ...
    Mutual Funds & ETFs

    Understanding The Bond Behemoth That ...

comments powered by Disqus
Hot Definitions
  1. 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 ...
  2. 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 ...
  3. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  4. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  5. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  6. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
Trading Center