A Primer on Mutual Fund Fees – Sales Load

This is a post by our regular columnist Clark.

It is common knowledge, at least among personal finance circles, that mutual funds charge high fees. These fees come in a variety of forms and this series will take a look at them. Please note that this series is written with the North American readership in mind and that some charges and fees may not be applicable to both sides of the border.

Sales Load

When a broker (salesperson) is involved in the sale of a mutual fund, which typically is the case, the fund company pays a commission to them. This commission is termed as “sales load” and can be treated as being similar to the trading commission that investors pay their discount broker when they buy stocks or exchange-traded fund (ETF). Please note that the comparison is only meant to show similarities in the transaction chain and not to equate the actual percentages themselves. There are two types of sales loads.

Front-end Sales Load

This type of fee is charged at the time of purchase of mutual fund units. Front-end fees are a load on purchases since it decreases the amount of money available for purchasing mutual fund units. E.g., Mr. Investor may contribute $5000 to buy units of mutual fund ZYX, but if the fund has a 5% front-end sales load, then they will be left with only $4750 [($5000-($5000*0.05)] for the actual purchase. The ‘missing’ $250 was deducted from the contribution to pay the seller (broker).

Deferred Sales Load

As the name implies, this type of fee is charged after purchase (hence, deferred). To be specific, the charges are paid when Mr. Investor redeems their fund units. For such a back-end sales load, there is no front-end sales charge and Mr. Investor would have the full $5000 (assuming there are no other fees) for purchase of ZYX fund units (continuing from the example above). If the fund has the same 5% charge but in the deferred form, then the sales load will be withheld at the time of sale (redemption). Generally, mutual funds will use the lesser amount of the initial and final value of the investment to deduct the back-end sales load. However, it would be negligence on the investor’s part if this was assumed to be the case all the time; a look at the fund’s prospectus should clarify whether this is the case for that fund.

Contingent Deferred Sales Load

The widely used type of deferred sales load is the contingent deferred sales load – the contingency being the length of time that the investor holds the fund units. So, the longer the holding period, the lower the back-end sales charge and may become zero if the investor stays invested for the maximum number of years as outlined in the fund’s prospectus. E.g., Fund ZYX may have a contingent deferred sales load as given below:

  • Held for 1 year: 6%
  • Held for 2 years: 5%
  • Held for 3 years: 4%
  • Held for 4 years: 3%
  • Held for 5 years: 2%
  • Held for 6 years: 1%
  • Held for 7 years: 0%

Typically, a fund with a contingent deferred sales load may also have a 12b-1 fee (discussed in Part II) that is collected annually.

No-Load Fund

A fund with no load will not charge any sales fees. However, there are certain fees that are not classified as sales load and hence, they can be collected while still maintaining the “no-load” tag. E.g., sales load does not include purchase fees, redemption fees or account fees.

Part II of the primer will discuss some of the other charges associated with owning mutual funds.

Have you held a mutual fund with front-end or deferred sales loads? Have you paid the contingent deferred sales load? Or, did you consciously hold onto the fund to avoid the charge?

About the Author: Clark works in Saskatchewan and has been working to build his (DIY) investment portfolio, structured for an early retirement. He loves reading (and using the lessons learned) about personal finance, technology and minimalism.  You can read his other articles here.

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FT is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.
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8 years ago

In CET, Your money will go in pool of students. When some students don’t go for college so government grant for those students will be distributed among remaining students in the pool. That is something additional you receive if your kid go to college.

1) Your Money + Return on investment
2) Your government grant + Return on investment
3) Portion of other students ‘Govrnment grants + Return on investment’ only if your student go to college

8 years ago

Hi FrugalTrader,
Have you ever compare CET Vs TD e-series in terms of Return ?

In CET, you are also eligible to get that portion of government grants from those kids who don’t go to college.

Please advise.


8 years ago

Hi Ed Rempel,
I am king of confuse about where to invest for RESP ?
1)TD e-series funds.
2) CET
3)Any other best RESP option

Can you please advise ?


Paul N
10 years ago

Thank you

I appreciate you taking the time and presenting that information and viewpoint.

Ed Rempel
10 years ago

Hi Paul,

Yes, TD is good at bond and income funds. This one had 25% higher return with 40% lower risk than the TSX since inception 12 years ago. Quite good.

The reason it has a higher return is that it did not make that massive Nortel error that the TSX made.At the peak, the TSX60 was 48% Nortel, which of course went to zero.

Diversification has always been a big problem with the TSX. Right now, it is essentially a resource sector fund and things have worked out so far. Ten years ago, it was essentially a technology sector fund. That worked great for a while and then went very wrong.

My issue is that it is 93% correlated with the TSX. Six of the top 10 are the same, which makes it a closet indexer.

Since 2003 (after the Nortel error of the TSX), it has had only 2/3 the return of the TSX. It is a more conservative version of the index, with 35% lower return and 40% lower risk.


paul n
10 years ago

Hi Ed,

To answer your questions,

Yes the same fund manger – Doug Warwick. The fund is TDB622.

I liked this fund for several reasons. It’s simple. The MER at 1.40 is not too bad (not everyone will agree). It is a fairly safe fund with a fair return. It pays a monthly dividend which purchases you new units automatically. No load. Doing a search on the internet it is recommended by different non related people and websites similar to this one. I read that it had one some awards over the years.

It has even won another award for 2011 (I just rechecked now) :


I have other investments as well but this is kind of my “Rock”.

Ed Rempel
10 years ago

Hi Paul,

Good point. I’m always fascinated by researching and picking good funds.

What makes you think it is a good fund? Is that return likely to be repeated, or was it just that it’s sector or strategy was in favour? Is it fund manager skill or luck? Does the fund have the same fund manager for the last 10 years?