====== Sales Load ======
Sales Load (often just called a "load") is a sales commission or fee you pay when you buy or sell shares in a [[mutual fund]]. Think of it as a toll you pay to get on the investment highway. This fee doesn't go to the fund's manager to help pick better stocks; instead, it goes directly into the pocket of the broker or financial advisor who sold you the fund. It’s their compensation for providing advice and facilitating the sale. The problem? This load is deducted directly from your investment, meaning less of your hard-earned money actually goes to work for you. If you invest €1,000 into a fund with a 5% sales load, €50 is immediately skimmed off the top as a commission. Only €950 gets invested. This means your investment is starting in a hole, needing to gain over 5% just for you to break even.
===== Types of Sales Loads =====
This is where it gets a little tricky, as funds have devised a few different ways to charge you. They are typically identified by different //share classes// (e.g., Class A, Class B, Class C).
==== Front-End Load (Class A Shares) ====
This is the most straightforward type of load. You pay the commission //upfront//, when you buy the fund shares.
  * **How it works:** The load is a percentage of your total investment, deducted at the time of purchase. Using our earlier example, a 5% front-end load on a $10,000 investment means $500 goes to the salesperson, and $9,500 is invested in the fund.
  * **The silver lining (if you can call it that):** These funds often have lower annual fees (called the [[expense ratio]]) compared to other share classes. Many also offer [[breakpoint]]s, which are discounts on the sales load for larger investment amounts.
==== Back-End Load (Class B Shares) ====
This type, also known as a [[Contingent Deferred Sales Charge]] (CDSC), is sneakier. You don't pay anything upfront, but you get hit with a fee if you sell your shares within a certain period, typically 5 to 8 years.
  * **How it works:** The fee is structured on a sliding scale. For example, you might pay a 5% charge if you sell in the first year, 4% in the second year, and so on, until the fee disappears completely. This is designed to lock you in and discourage early withdrawals.
  * **The catch:** Class B shares almost always have higher annual expense ratios than Class A shares. Once the back-end load period is over, they often convert into the lower-cost Class A shares.
==== Level Load (Class C Shares) ====
Level-load shares are a bit of a hybrid, designed for investors with shorter time horizons.
  * **How it works:** They typically have no front-end load and a small back-end load (e.g., 1%) that only applies if you sell within the first year.
  * **The real cost:** Their main drawback is a perpetually high annual expense ratio that //never// goes down. Over the long run, this can be far more costly than a one-time front-end load, as the fee nibbles away at your returns year after year.
===== The Value Investor's Take =====
Let's be blunt: from a [[value investing]] perspective, sales loads are a terrible deal. A value investor's primary goal is to buy assets for less than their intrinsic worth and to minimize costs, as costs are a direct drag on performance. Paying a sales load is like starting a 100-meter race 5 meters behind the starting line—it's a self-inflicted handicap.
As the legendary [[Warren Buffett]] has said, performance comes and goes, but fees are forever. A 5% front-end load isn't just a 5% loss; it's the loss of all the future gains that 5% could have generated for you through the magic of [[compounding]]. It's a guaranteed way to underperform the fund itself.
**So, what's the alternative?**
Simple: [[No-Load Fund]]s. These are funds that do not charge any sales commission. You can buy and sell them without paying a broker a cut. This doesn't mean they are free—all funds have operating costs, which are captured in the annual expense ratio. However, by choosing a no-load fund, you ensure that 100% of your investment goes to work for you from day one. For a value investor, the choice is clear: seek out low-cost, no-load funds and let your money do the hard work, instead of paying someone else's commission.