Level Load

DEFINITION of 'Level Load'

An annual charge deducted from an investor's mutual fund assets to pay for distribution and marketing costs for as long as the investor holds the fund. For the most part, this fee is paid to intermediaries for selling a fund's shares to the retail public.

Also known as a "12b-1 fee".

BREAKING DOWN 'Level Load'

Unlike the one-time front-end (Class A shares) or back-end (Class B shares) loads, level loads (Class C shares) are applied annually as a fixed percentage of a mutual fund's average net assets. Also, unlike front-end and back-end sales charges, these 12b-1 fees are included in a fund's operating expenses.

While the load percentage doesn't change, if the net asset value of the fund increases through capital appreciation, the dollar value of the load will actually become more expensive and continuously erode the fund's return.

Total 12b-1 fees are capped by law at 1%. Generally, this fee will be pegged at 0.25%, which allows funds that don't exceed this percentage to be classified as no-load funds. This bit of magic, as well as the dubious necessity for the 12b-1 in a robust mutual fund environment, has put the justification for continued use of level load under considerable consumer and regulatory scrutiny.

RELATED TERMS
  1. 12B-1 Plan

    A no-load mutual fund that is allowed to use fund assets to pay ...
  2. Load

    A sales charge or commission charged to an investor when buying ...
  3. Load Fund

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

    A fee (sales charge or load) that investors pay when selling ...
  5. 12B-1 Fee

    An annual marketing or distribution fee on a mutual fund. The ...
  6. 12B-1 Fund

    A type of mutual fund that charges its holders 12B-1 fees instead ...
Related Articles
  1. ETFs & Mutual Funds

    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.
  2. ETFs & Mutual Funds

    Selling Mutual Funds: What Happens When You Liquidate?

    Learn about the hidden costs that can be triggered when you redeem mutual fund shares. Even no-load funds have fees and expenses you may not know about.
  3. ETFs & Mutual Funds

    12b-1: Understanding Mutual Fund Fees

    Many mutual funds charge investors a 12b-1 fee to pay for marketing and promotion expenses.
  4. ETFs & Mutual Funds

    The Lowdown On No-Load Mutual Funds

    These funds let you cut out the middleman - and the fees.
  5. ETFs & Mutual Funds

    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.
  6. Investing

    What is the Importance of a Share's Class?

    The meaning of share classes varies, depending on the investment vehicle.
  7. Managing Wealth

    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.
  8. ETFs & Mutual Funds

    How To Pick A Good Mutual Fund

    Learn how to evaluate mutual funds and find the right one for you.
  9. Managing Wealth

    What is a 12b-1 Fee?

    Mutual funds typically charge between .25% and 1% in 12b-1 fees for marketing, distribution and administration expenses.
  10. ETFs & Mutual Funds

    Why Are ETF Fees Lower Than Mutual Funds?

    Discover all the reasons ETFs typically have lower fees than mutual funds, including their passive management and the absence of load and 12b-1 fees.
RELATED FAQS
  1. What's the difference between a load and no-load mutual fund?

  2. Why is the 12b-1 fee controversial?

    Learn about the 12b-1 fee that is applied to many mutual funds, and why a large number of analysts and investors question ... Read Answer >>
  3. What is the 12b-1 fee meant to cover?

    Understand what a 12b-1 fee is and what it's meant to cover. Learn about how the fee works and what personal investors should ... Read Answer >>
  4. What is considered a reasonable 12b-1 fee?

    Learn what is generally considered to be a reasonable 12b-1 fee, what these fees are charged for and how these fees are regulated. Read Answer >>
  5. What action is the SEC likely to take on 12b-1 fees?

    Read about what actions the SEC may take with regard to 12b-1 fees, and for what purposes these types of fees can be used ... 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. Glass-Steagall Act

    An act the U.S. Congress passed in 1933 as the Banking Act, which prohibited commercial banks from participating in the investment ...
  2. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  3. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  4. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  5. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  6. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
Trading Center