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?


For load mutual funds, breakpoint is the dollar amount for the purchase of the fund's shares that qualifies an investor for a lower sales charge. The larger the investment, the larger the discount. The purchase may either be made in a lump sum or by staggering payments within a specified period of time. Breakpoints are usually offered for funds with a front-end sales charge but may be available for other types of sales charges as well.

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

If 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 more sophisticated. They are less likely to use mutual funds and may need the incentive of a lower fee to consider them for part of their investment mix.

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