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Mutual Funds – Contingent Deferred Sales Charge

Mutual funds are faced with a lot of expenses, among them are the contingent deferred sales charges. This basically refers to the redemption fee that is reduced or eliminated for specified holding periods on a constant reducing rate. A redemption fee is that charge that is imposed on any share that an investor wishes to sell off or to liquidate.

These charges differ in regard to the type of stock or share that one holds. For that reason, an investor is called upon to first scrutinize the different types of stocks and securities there are under the mutual funds category. Selecting these categories can prove to be quite a challenge but with the contingent deferred sales charges, the decision becomes easier to make. Working with a financial advisor even makes the process much easier.

It is important that one gets to understand what these fees entail and how they differ from all the other fees that are bound to be charged on the investment. The fees are in many cases given in percentages and are transaction based, and this applies to the CDSC fees as well. Some of the other fees that go hand in hand with the CDSC fees include the 12b-1 fees, which is the charge that is paid for the cost of marketing and selling the fund. They are normally charged at a 1% rate.

The CDSC charges depend on the type of class the fund falls under. For example, class A shares carry a front end load, meaning that, they are charged upfront upon liquidation or sale. Class b shares have a back-end load, meaning that, the fees keep reducing over time, and the longer the share is held, the better for shareholder because, he can have reduced charging rates. Class C shares carry an ongoing charge, which is usually in the form of the 12b-1 charge.

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