Level Load

AAA

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".

INVESTOPEDIA EXPLAINS '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. Costs And Expenses

    As related to mutual funds, it is one of the principal criteria ...
  2. Class A Shares

    A classification of common stock that may be accompanied by more ...
  3. Class B Shares

    A classification of common stock that may be accompanied by more ...
  4. Sales Charge

    A commission paid by an investor on his or her investment in ...
  5. Load

    A sales charge or commission charged to an investor when buying ...
  6. 12B-1 Fee

    An annual marketing or distribution fee on a mutual fund. The ...
Related Articles
  1. The Lowdown On No-Load Mutual Funds
    Mutual Funds & ETFs

    The Lowdown On No-Load Mutual Funds

  2. The ABCs Of Mutual Fund Classes
    Retirement

    The ABCs Of Mutual Fund Classes

  3. What's the difference between a load ...
    Investing

    What's the difference between a load ...

  4. Mutual Fund Basics Tutorial
    Mutual Funds & ETFs

    Mutual Fund Basics Tutorial

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center