In finance, the term back-end load refers to the fees charged to the shareholder of an investment fund when they sell their fund shares. It is synonymous with the term contingent deferred sales charge (CDSC).
Not all investment funds charge back-end loads. Some investment funds only charge fees when investors sell their fund shares before they have held them for a predetermined term, while allowing fee-free withdrawal after that.
Back-end loads are an important factor to consider when investing in funds because they directly impact potential returns. They are not accounted for in the total expense ratios (TERs) published by investment funds because they are not recurring costs. You are charged a back-end load just once when you sell your shares.
Example of a back-end load:
An investment fund that focuses on long-term growth wants to encourage investors to hold their shares in the fund for a minimum of 5 years. In order to do this, it imposes a back-end load equal to 1% of the value of shares which are sold back to the fund within 5 years of their purchase date. If an investor were to sell their shares within the first 5 years of investing in the fund, they would pay a penalty equal to 1% of the value of their shares.
The moneyland.ch retirement fund comparison accounts for back-end loads and shows the total costs of investing through Swiss retirement funds.
See also: Front end load
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