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Definition of 'Back-End Load'
A load is a commission that is paid to sales representatives when they sell investment products such as mutual funds. Back-end loads are not deducted from investor assets at the time of the sale. Product companies pay commissions and recover their costs with higher fees that are paid by investors. They protect themselves with penalties for withdrawal (the back-end load). That is, investors must pay a penalty to sell an investment that was sold to them with a back-end load. For example, if an investor wanted to sell a back-end load investment in less than 12 months, the penalty could be 7% of assets. Back-end loads decline 1% per year so the longer the investor holds the investment the lower the penalty if they want to sell it. Most penalties expire after seven years.