Series 65: Breakpoints

Breakpoints

Mutual funds often reward customers for investing larger amounts in a fund or a family of funds. The reward is a discount on a front-end sales charge if they reach a certain dollar amount. The dollar amount is called a breakpoint.

• • Example: MegaFund charges a 5% sales charge on investments under $25,000 and 4.25% on investments at or above $25,000. The breakpoint in this case would be $25,000.

As an investor continues to add money to a fund, the value of the investor’s contribution to the mutual fund increases. If this value reaches the next breakpoint, the investor is entitled to the lower sales load on the purchase of any additional shares. This is called a right of accumulation (ROA).

In some cases, an investor knows that she will be buying additional shares in the future. If an investor plans to reach a breakpoint within the next 13 months, she can wri