Load signifies a charge or sales fee. Back End load is part of the fee levied on mutual funds. Back End load means a fee which is levied at the time of mutual fund redemption. The fee is shared by the Fund House with brokers on completion of a certain timeframe. The back end load is a percentage charged on the investment’s assets and levied at the time an investor redeems the scheme units. It is higher during the initial phase and is gradually brought down till it becomes zero based on the holding period.
Why is Back End Load important?
Mutual Fund investors should keep in mind certain facts with respect to Back End Load: 1. Check the purpose of a back-end load. Markets have zero or No load funds and these can present a better option 2. Not all funds or Fund Houses levy a back-end load, but the cost of such a load is borne by the investor 3. It is levied as a deterrent for early withdrawal of Mutual Fund units