A breakpoint is the level at which your account balance in a mutual fund company or the size of a new investment in the company's funds qualifies you to pay a reduced sales charge.
Fund companies that charge a percentage of the amount you invest as a front-end load, or sales charge, may offer this cost saving. They are not required to do so, but if they do use breakpoints, they must ensure that all clients who qualify get the discount.
In most cases, the first breakpoint is $25,000, with further reductions for each additional $25,000 or $50,000 purchase. For example, if the standard load were 5.5%, it might drop to 5.25% at $25,000, to 5% at $50,000, and perhaps to as low as 2.5% with an investment of $250,000.
In calculating breakpoints, some fund companies will combine the value of all of your investments in the mutual funds they offer. Other companies count the investments of all of the members of your household or give you credit for purchases you intend to make in the future.
- Browse Related Terms: 12b-1 fee, Back-end load, breakpoint, Contingent deferred sales load, front-end load, Fund network, Level load, load, Load fund, Mutual Fund, No-load mutual fund, Redemption fee, Sales charge, Share class, Surrender fee
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