Which statement best describes front-end loads?

• A. Back-end loads on redemption.
• B. Front-end loads at purchase.
• C. Ongoing fees are expense ratios.
• D. No-load funds always have zero fees.

Answer: (B)

Front-end loads are sales charges paid at the time you buy shares of a mutual fund. This upfront fee is deducted from your investment, so the amount that goes into the fund itself is reduced by the charge. That’s why the statement describes front-end loads as occurring at purchase.

This is different from back-end loads, which are charges you pay when you redeem or sell shares, not when you buy. Ongoing fees are expense ratios, which are separate from any front- or back-end loads. And while no-load funds don’t charge a sales load at purchase, they can still have other fees (such as ongoing expense ratios or small transaction fees); they don’t universally have zero fees.