Breakpoint Sale


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.

BREAKING DOWN '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.

  1. Letter of Intent - LOI

    A document outlining the terms of an agreement before it is finalized. ...
  2. Back-End Load

    A fee (sales charge or load) that investors pay when selling ...
  3. No-Load Fund

    A mutual fund in which shares are sold without a commission or ...
  4. Front-End Load

    A commission or sales charge applied at the time of the initial ...
  5. Breakpoint

    For load mutual funds, the dollar amount for the purchase of ...
  6. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected ...
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