Contingent Deferred Sales Charge (CDSC)

What is a 'Contingent Deferred Sales Charge (CDSC)'

A contingent deferred sales charge (CDSC) is a fee (sales charge or load) that mutual fund investors pay when selling Class-B fund shares within a specified number of years of the date on which they were originally purchased.

Also known as a "back-end load" or "sales charge".

BREAKING DOWN 'Contingent Deferred Sales Charge (CDSC)'

For mutual funds with share classes that determine when investors pay the fund's load or sales charge, Class-B shares carry a contingent deferred sales charge during a five- to 10-year holding period calculated from the time of the initial investment.

The fee amounts to a percentage of the value of the shares being sold. It is highest in the first year of the specified period and decreases annually until the period ends, at which time it drops to zero. As a mutual fund investor, if you were to buy and hold Class-B fund shares until the end of the specified period, you could avoid paying this type of fund's sales charge, thereby enhancing your investment return. Unfortunately, fund research indicates that mutual fund investors are holding their funds, on average, for less than five years, which often triggers the application of a back-end sales charge in a Class-B share fund investment.

RELATED TERMS
  1. Back-End Load

    A fee (sales charge or load) that investors pay when selling ...
  2. Load

    A sales charge or commission charged to an investor when buying ...
  3. Exit Fee

    A fee or charge assessed to an investor for withdrawing money ...
  4. Load Fund

    A mutual fund that comes with a sales charge or commission. The ...
  5. Front-End Load

    A commission or sales charge applied at the time of the initial ...
  6. 12B-1 Plan

    A no-load mutual fund that is allowed to use fund assets to pay ...
Related Articles
  1. Mutual Funds & ETFs

    Trading Mutual Funds For Beginners

    Learn about the basics of trading and investing in mutual funds. Understand how the fees charged by mutual funds can impact the performance of an investment.
  2. Mutual Funds & ETFs

    Mutual Funds: The Costs

    Costs are the biggest problem with mutual funds. These costs eat into your return, and they are the main reason why the majority of funds end up with sub-par performance. What's even more disturbing ...
  3. Options & Futures

    Fund Costs and Expenses

    How much a fund charges for its services is the most important indicator of how well it will perform.
  4. Options & Futures

    Overview Of Mutual Fund Expenses

    By Richard Loth (Contact | Biography)"In the mutual fund field, costs assume a tremendous importance for the long-term investor. Other things held equal, lower costs mean higher returns." -John ...
  5. Investing Basics

    What's a No-Load Fund?

    A no-load fund is a type of mutual fund that does not charge a front-end, back-end or level sales charge.
  6. Mutual Funds & ETFs

    The Lowdown On No-Load Mutual Funds

    These funds let you cut out the middleman - and the fees.
  7. Stock Analysis

    Forget About Mutual Funds: 5 Reasons You Should Invest in ETFs Instead

    After World War II, a new U.S. economy and the desire to put money away against another Great Depression drove the investing public to mutual funds. Today, more than 44% of U.S. households invest ...
  8. Mutual Funds & ETFs

    A Guide For Picking Long Term Mutual Funds

    Learn about considerations for investors when buying shares in a mutual fund for a long-term investment, including fees, type of management and portfolio goals.
  9. Mutual Funds & ETFs

    The ABCs of Mutual Fund Classes

    There are three main mutual fund classes, and each charges fees in a different way.
  10. Mutual Funds & ETFs

    How To Pick A Good Mutual Fund

    Picking a good mutual fund might be easier than you think.
RELATED FAQS
  1. What's the difference between a load and no-load mutual fund?

    A mutual fund is simply a large group of people who lump their money together for a management company to invest. And, like ... Read Answer >>
  2. Does OptionsHouse have mutual funds?

    Learn about how investors can buy shares in mutual funds through OptionsHouse. Read how investors need to call the brokerage ... Read Answer >>
  3. Where do I look for fees that I am charged on investments? What are those fees called?

    The fees and expenses charged for investments vary. The fees usually depend on the type of investment and the investment ... Read Answer >>
  4. What are typical trust fund management fees?

    Learn about trust fund management fees, such as the annual management fee, annual expense ratio, brokerage commissions and ... Read Answer >>
  5. What is the difference between a no-load mutual fund and a fund that has no front ...

    Learn the difference between a no-load mutual fund and a mutual fund that has no front load, and understand why each method ... Read Answer >>
  6. Is the upfront cost of Class A mutual fund shares worth it?

    Learn about the differences between mutual fund share classes, and discover under what circumstances the Class A shares make ... Read Answer >>
Hot Definitions
  1. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  2. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  3. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  4. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  5. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  6. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
Trading Center