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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?

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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

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