Reviewed by Sep 30, 2020| Updated on
The level load is an annual charge for owning mutual fund units. The load reduces an investors profit from the mutual fund investment. The load is calculated as a percentage of the mutual fund holding.
The level load is different from the front-end load and back-end load imposed on the purchase and sale of shares. A front-end load is the charges paid when the shares are bought, and a back-end load is levied when the investor sells shares.
The amount of level load and service fee is mentioned in the prospectus of a mutual fund.
Shares with level loads are classified as C class shares.
A level load covers the charges incurred for fund distribution, marketing, and servicing.
The level load share fees are calculated based on the mutual fund's average net assets.
There is also a difference between the level load and other loads when calculating a fund's expense ratio. Front-end load and back-end load are not part of the expense ratio.
While the percentage of the load does not change, if the net asset value of the fund increases through capital appreciation, the value of the load will become more expensive and continuously erode the fund's return.
The level load fees are generally in the range of 0.25%-1%. The fee determines the cost of running the mutual fund, advisory costs, distribution, marketing, and advertising.
When a fund's level load fee does not exceed the 0.25% level, it may be called no-load funds.