A back-end load is a fee paid by holders of investments such as mutual funds or annuities. Investors pay this fee when they sell investments before a time prescribed by the fund or annuity has expired. The fee is activated if shares are sold within this time, usually five to ten years. This time range is called a holding period.

Back-end loads are typically determined by calculating a percentage of the total amount of shares sold. The percentage is greatest after the first year and diminishes yearly until the end of the holding period. At the end of the holding period, the back-end load goes to a zero balance.

Back-end loads are also referred to as a “contingent deferred sales charge,” “contingent deferred sales load,” or “redemption fee.”

Investments which require a fee paid up front (i.e., a sales charge or a commission paid upon opening the account) do not usually require a back-end load as well.

The shares in an investment such as a mutual fund may be designated by different classes. Class B shares are typically charged with a back-end load, while Class A shares charge a front-end load, a fee taken up front. For more on loads and share class designations, see the article “Mutual Fund Share Classes” at http://www.stocks-investing.com.

Back-end loads can be attractive for a few reasons:

- Investments can grow over the life of the account without ongoing fees cutting into revenue.

- An investor may be more motivated to leave the investment alone if a fee is paid upon withdrawal.

Back-end loads do not include a fund’s operating expenses; this fee is separate and paid to an independent financial intermediary.