Load is defined as the fee or the commission that an investor pays to a mutual fund at the time of purchasing or redeeming the shares of the mutual fund.
If the commission is charged when the investor buys the shares, it is known as a front-end load. On the other hand if the commission is charged when the investors redeems his shares, it is known as a back-end load.
Certain funds apply back-end loads only if the shares are redeemed within a specific time period after being bought.
The argument for applying loads on mutual fund transactions is that these loads will discourage investors from trading frequently in mutual funds. If the investors quickly move in and out of mutual funds, the funds have to maintain a high cash position to meet these redemptions, which in turn decreases the returns of the funds.
Also frequent trading means the expenses of the mutual funds go up.
There are various arguments against load funds:
-The fees that the mutual funds collect as loads are passed on to the fund brokers. The loads do not provide any incentive for the fund manager for better performance of the funds. In other words, a load fund has no reason...