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Front-end Load

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A front-end load is a sales charge or commission that an investment levies on shares bought. Mutual funds and insurance policies are best known for charging them. The counterpart to the front-end load is the back-end load, which is charged when shares are sold. A front-end load compensates those who do the buying and selling for the investment (usually brokers). In mutual funds, a front-end load can also serve to discourage frequent buying and selling. A front-end load is deducted from the amount invested. For example, if you buy $1,000 worth of mutual fund shares with a 3% front-end load, you will be left with $970 to invest. A mutual fund with a front-end load is called a load fund. By law, front-end loads may not exceed 8.5% of the amount invested.

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