Contingent Deferred Sales Charge

What is a contingent deferred sales charge (CDSC)? Find a clear explanation of this mutual fund investment term here.

In mutual fund investment, a contingent deferred sales charge (CDSC) is a fee levied by an investment fund when fund shares are sold. This term is synonymous with the term back end load.

Some mutual funds charge contingent deferred sales charges when investors sell shares back to the fund. Some mutual funds charge these fees for returns of certain classes of shares, but not for others (See: Mutual fund share class).

Before you invest in a mutual fund, it is important that you understand whether or not the fund will charge a contingent deferred sales charge when you sell your shares back to the fund. If this fee is charged, you should understand how high the charge is, as it represents a cost which will cut into potential capital gains.

Contingent deferred sales charges are not included in the total expense ratios (TERs) quoted by mutual funds, as they are a one-time cost. The TER only includes ongoing costs. When calculating the cost of investing in a fund, you must account for the front end load (if it has one) and the contingent deferred sales charge in addition to the TER. Possible custodial fees charged by a custodian bank for the safekeeping of your fund shares are another cost which should be accounted for.

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Editor Daniel Dreier
Daniel Dreier is editor and personal finance expert at moneyland.ch.