Front-End Load

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DEFINITION of 'Front-End Load'

A commission or sales charge applied at the time of the initial purchase for an investment, usually mutual funds and insurance policies. It is deducted from the investment amount and, as a result, it lowers the size of the investment.

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BREAKING DOWN 'Front-End Load'

Front-end loads are paid to investment intermediaries (financial planners, brokers, investment advisors) as sales commissions. As such, these sales charges are not part of a mutual fund's operating expenses. It is argued that a load is a cost that investors incur for obtaining an investment intermediary's expertise in selecting appropriate funds for clients. It is a matter of record that load funds do not outperform no-load funds.

Generally, the sales charge on a load mutual fund will be waived if such a fund is included as an investment option in a retirement plan such as a 401(k).

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