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. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
  2. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  3. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  4. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  5. 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 ...
  6. 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 ...
Trading Center