Contingent Deferred Sales Charge (CDSC)

DEFINITION of 'Contingent Deferred Sales Charge (CDSC)'

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. Headline Inflation

    The raw inflation figure as reported through the Consumer Price ...
  2. Back-End Load

    A fee (sales charge or load) that investors pay when selling ...
  3. Management Fee

    A charge levied by an investment manager for managing an investment ...
  4. Exit Fee

    A fee or charge assessed to an investor for withdrawing money ...
  5. Deferred Load

    A sales charge or fee that is assessed when an investor sells ...
  6. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected ...
Related Articles
  1. Fundamental Analysis

    3 Variable Annuities to Consider

    Discover three variable annuities to consider in your retirement portfolio. Read summaries of each annuity and the benefits they offer.
  2. Retirement

    Buying Annuities in a Low Interest Rate World

    Learn if buying an annuity makes sense in a low interest rate environment. Also discover the different types of annuities and how interest rates affect them.
  3. Mutual Funds & ETFs

    How Mutual Fund Companies Make Money

    Read about the many different kinds of fees and sales charges mutual fund companies can use to generate revenue from those who invest in their shares.
  4. Retirement

    The ABCs Of Mutual Fund Classes

    Do you understand how the various types of shares differ? We give you the pros and cons of each.
  5. Investing Basics

    How liquid are Fidelity mutual funds?

    Review the liquidity features of mutual fund shares and an overview of Fidelity mutual funds. Most investors look for convenient access to their investments.
  6. Mutual Funds & ETFs

    Which Fund Share Class is Best for Retirement?

    Mutual funds are a popular investment for retirement. Here's how to choose the best share class when investing in them.
  7. Mutual Funds & ETFs

    Top 5 Wellington Funds for Retirement Diversification in 2016

    Discover the top five Wellington Management funds for retirement diversification in 2016, with a summary and performance details of each fund.
  8. Mutual Funds & ETFs

    3 Morgan Stanley Funds Rated 5 Stars by Morningstar

    Discover the three best mutual funds administered and managed by Morgan Stanley that received five-star overall ratings from Morningstar.
  9. Mutual Funds & ETFs

    Top 3 Voya Funds for Retirement Diversification in 2016

    Learn about Voya Investment Management's mutual fund offerings and the three Voya funds to consider for retirement diversification in 2016.
  10. Retirement

    Smart Ways to Tap Your Retirement Portfolio

    A rundown of strategies, from what to liquidate first to how much to withdraw, along with their tax consquences.
RELATED FAQS
  1. Do financial advisors get paid by mutual funds?

    Financial advisors are reimbursed by mutual funds in exchange for the investment and financial advice they provide. A financial ... Read Full Answer >>
  2. What is the difference between a no-load mutual fund and a fund that has no front ...

    Mutual fund companies provide investors a number of methods to acquire shares, including paying a front-end sales load, investing ... Read Full Answer >>
  3. Can I sell mutual fund shares below their minimum intial purchase amount without ...

    Yes. You can freely buy and sell shares of a mutual fund regardless of any requirement for a minimal initial purchase amount ... Read Full Answer >>
  4. Are target-date retirement funds good investments?

    The main benefit of target-date retirement funds is convenience. If you really don't want to bother with your retirement ... Read Full Answer >>
  5. Do mutual funds require a demat account?

    A dematerialized account enables electronic transfer of funds. The account is used so an investor does not need to hold the ... Read Full Answer >>
  6. How liquid are Vanguard mutual funds?

    The Vanguard mutual fund family is one of the largest and most well-recognized fund family in the financial industry. Its ... Read Full Answer >>
Hot Definitions
  1. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  2. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  3. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  4. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  5. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
Trading Center