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Save on Mutual Fund Fees

Pay lower fees to mutual funds by using breakpoints.

By
Andrew Horowitz
June 19, 2008
Episode #075

Page 1 of 3

Today on “Money Girl”, a few quick and dirty tips on how to reduce the loads you pay on mutual funds using breakpoints.


Let me ask you something..Are you tired of paying high sales charges every time you invest in mutual funds? Better yet, have you ever wondered why some people seem to be paying lower fees than you?

If so, then you may be interested in a little thing called breakpoints. And, if you have a good deal of money to invest you should listen closely because this episode may just save you thousands of dollars.

What Is a Load?

Breakpoints are discounts on sales charges that you can get when investing large sums into a what's called a load mutual fund. A load is the sales charge some mutual funds charge you for investing in their fund. Now, it is important to note that there are several ways to invest in mutual funds and just as many fee structures. They range from front-end load, where you pay the fee up front, to back-end load, where, depending on how long you hold the fund, you will pay a fee when you take your money out, and even true no-loads, where you pay no sales charges at all. While I recommend only no-load funds to my clients, if you work with a full-service stockbroker, you will probably be paying some form of commission when you invest. So, if that is you...listen up!

Breakpoints Reduce the Load

A group of funds distributed by one company is referred to as a fund family. Breakpoints exist to encourage investors to combine all their assets into a single fund family in exchange for a reduction of fees. And, if enough money is invested (but that is typically over one million dollars) the sales charges are usually waived entirely.

One note: Sales charge breakpoints only apply to funds with a front-end load, sometimes called "A" shares. Remember, since you are charged a fee or a load at the time of investment, it is considered FRONT-END. Also, you can only qualify for breakpoints with investments in the SAME fund family.

Make a Large Investment

The good news is that there are a few ways to qualify for a breakpoint.

First of all, the most common: the investment of a large sum of money all at once. For most funds the breakpoint begins at $25,000. The more you invest the more of a discount you get. But there are other tricks too besides just having a wad of cash.

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