Take the 2-minute tour ×
Personal Finance & Money Stack Exchange is a question and answer site for people who want to be financially literate. It's 100% free, no registration required.

I was talking with my financial adviser today and they mentioned mutual fund breakpoints. The most I could make of it was it was a discount on the mutual fund (either the maintenance fee or load). They said that normal breakpoints occur when you purchase 50, 100, and 200 thousand dollars worth of a fund. What are these breakpoints and what do they do for me?

share|improve this question

1 Answer 1

up vote 6 down vote accepted

Breakpoints are a feature of front-end fee payment mutual funds.

As outlined in Investopedia, perhaps a normal front-end fee would be 0.5% of your investment.

If, however, you put up more than a certain amount, perhaps $100,000, then you would pay 0.4% or some such. You get a break on the fees charged. There may be multiple levels, as you mention.

The thought process on their part is likely two-fold. First is that it is still a sizable amount of money, even discounted.

Secondly, and probably more importantly, investors with a lot of cash are generally but not always more sophisticated. They are less likely to use mutual funds at all, and may need the incentive of a lower fee to consider them as part of their investment mix.

Good Luck

share|improve this answer

Your Answer

 
discard

By posting your answer, you agree to the privacy policy and terms of service.

Not the answer you're looking for? Browse other questions tagged or ask your own question.