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CHAPTER 5

Original sales load – $35,000 5.75% = $2012.50 $15,000 5.75% = $862.50 20,000 4.75% = $950 Total sales load for second $35,000 investment = $1812.50 $2012.50 – $1812.50 = $200 savings

Mutual fund companies decrease the front-end sales load as the amount of the investment increases. The sales load is usually phased out at $1 million. Therefore, if you were to invest $1 million with the same mutual fund family in Class A shares, you would pay no front- end sales load. Some fund families do charge a contingent deferred sales charge (CDSC) of one percent for investments of $1 million or more. For example, the mutual fund company MFS charges a CDSC of one percent when the investment is redeemed within 12 months of the initial investment. After that 12-month period, though, the invest- ment would no longer be subject to any type of back-end load.

B Shares Class B shares do not have an up-front sales charge; rather, they have a back-end sales charge, or a surrender charge (CDSC). The surrender charges associated with Class B shares are similar to the surrender charge schedules for annuities, which we discuss in the next chapter. (See Table 5.1)

Table 5.1. General Surrender

Charges for Class B Mutual

Funds

Year

Percentage

1

5%

2

4%

3

4%

4

3%

5

2%

6

1%

7

0%

9

Convert to A shares

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