Front-End Load


The term front-end load is used to describe a commission or sales fee charged when an investment is purchased.  Front-end loads are usually associated with mutual funds, but they can also apply to other investments such as insurance policies or annuities.


Net Investment = Initial Investment - Front-End Fee


  • Front-End Fee = Investment x Front-End Load


Also known as a front-end fee or sales charge, a front-end load is a fee or sales commission paid to agents such as stockbrokers and financial advisors.  The fee is an up-front administrative charge that is used to pay for transaction costs and the advisor's expertise in selecting the investment.

Typical front-end fees may be as low as 2.5%; FINRA rules state a front-end load cannot be higher than 8.5% of the investment.  Mutual funds designated as Class-A shares will charge a front-end load.  This one-time fee is charged at the time of purchase, it is not considered when calculating the fund's annual expenses.

There is no empirical evidence supporting the assumption funds charging front-end loads outperform no-load funds.  For this reason, investors should carefully consider the value of paying these costs.  Mutual funds can also charge back-end loads, which are fees charged when the investment is sold.


Sam has $10,000 that he would like to invest in a mutual fund.  The prospectus of Mutual Fund A indicates a front-load fee of 5.0%.  The expense associated with the purchase of shares in Mutual Fund A would be:

= $10,000 x 5%
= $10,000 x 0.05, or $500

Sam's net investment in Mutual Fund A would then be:

= $10,000 - $500, or $9,500

Related Terms

mutual fund, back-end load