|
How You Can Make Breakpoints Work For You
Many mutual funds with front-end sales loads offer a discount on the sales load for a large investment. The investment levels at which discounts are available are called "breakpoints."
Example: A purchase of $49,500 in mutual fund shares may be charged a front-end sales load of 5.75% or $2,846.25, while a purchase of $50,000 in fund shares might be charged a sales load of 4.50% or $2,250. In this example, by choosing to invest $500 more in funds, the customer would have $596.25 more invested in fund assets. Typically, there are several breakpoints, and if you invest more and reach each of these thresholds, the greater the reduction in the sales load.
Each fund sets their own breakpoints and the terms and conditions through which discounts are available. These terms and conditions vary by funds and are subject to change. Before investing, please review carefully the relevant prospectus and Statement of Additional Information ("SAI"), as well as the appropriate sales load schedule.
How Breakpoints Work
Typically, you may be entitled to a lower front-end sales load based on a single transaction if the dollar amount of the transaction exceeds one or more breakpoints. In addition, some funds offer discounts based on purchases made over time, under a Right of Accumulation ("ROA") or Letter of Intent ("LOI").
- A ROA typically gives you a discount on your current mutual fund purchases by combining both your current and previous fund transactions to reach a breakpoint. For example, if you are investing $10,000 in a fund today, but previously had invested $40,000, those amounts can be combined to reach a $50,000 breakpoint, which will entitle you to a lower sales load on your $10,000 purchase.
- A LOI is a statement you sign that expresses your intent to invest an amount over the breakpoint within a given period of time specified by the fund. If you expect to invest regularly in a fund with a front-end sales load, it may be worth finding out if a LOI can help you qualify for a reduced charge. Please note that if you fail to invest the amount specified in your LOI, the fund can retroactively collect the higher fee.
- In the case of either ROAs or LOIs, you may become eligible for a breakpoint discount by combining your purchases with current eligible holdings, including those of your spouse and/or minor child, as well as those held in accounts at other brokerage firms.1 For example, if you and your spouse each previously purchased $20,000 in Class A shares of a fund family, you can qualify for the $50,000 breakpoint discount for your current purchase of $10,000 in funds in the same fund family.
You might also be able to aggregate purchases in different funds within a fund family, as well as different classes of shares you may have purchased.
To ensure that you receive all eligible breakpoint discounts, you should tell your financial advisor about your mutual fund holdings and those of other eligible accounts, including holdings at other brokers.The information provided herein is not intended to substitute, and is subject to the terms and conditions of, the current Prospectus and SAI of the respective Fund, and may change at any time. Because each Fund is different, you are urged to review the Prospectus and SAI of the relevant Fund.
1. Please read the fund's prospectus and SAI for information on the types of holdings that can help you reach your breakpoints, as well as other terms and conditions through which breakpoints are available.
|
