What exactly does it mean if a mutual fund has a front load or a back load?

What exactly is a front load? What is a back load?

What is a reasonable percentage for either, and what is getting too high?

A front end load is a sales charge that is prepaid when the stock is bought. Ex. $5000 invested in a 5% front end load fund will actually only purchase 4,750 in shares at current NAV. A back end load is a sales charge that is paid when you sell. $5,000 of mutual fund sold with a 5% deferred sales charge will net only $4,750.

The back end load will decrease over time Typically it will drop 1% each year after the initial year. Funds with back end loads will also typically have higher expense ratios.

Front end load remains in place for each purchase. Expense ratios are higher than institutional class shares but lower than back end funds.

A Class shares are generally front end loads
B Class shares are generally back end loads
C Class shares are also generally back end loads

Institutional class funds are only sold to 401k's, retirement plans, etc etc etc and have no loads and the lowest expense ratios. An individual can get these if they invest in the millions.

In the retail market, the sales charge is not fixed at what you read on Morningstar or Yahoo. It is typically dependent upon how much you invest and your preference for the loads. Ex. American Funds A class shares list a 5% front end load. But if you invest 100k with them that load is only 3.5%. Theory is that the more you invest, the more they earn and they can charge a lower percentage to reach that profit level due to the expense ratios and the loads. So, as you invest more you'll see first the loads disappear and then once that's gone you'll shift out of that class of fund into institutional pricing. They WILL get their money from you...

That too is why it's sometimes better to invest in a 401k than an IRA. If you're investing in mutual funds you can quite often get institutional pricing inside a 401k whereas in an IRA you'll get hit with a load and higher expense ratios. That difference can totally defeat the purpose of the IRA; even a ROTH!

As for reasonable? zero is reasonable. I think they hide the profits and make it difficult to compare prices. There are no load funds out there. But there are good funds that charge a load. Don't shun a load fund simply because it's got a load. Better to get a quality fund then worry about loads. Typical loads are 5% for front end adn 5.75% on back ends. Back end loads tend to be the most expensive in terms of overall fees.

i dont know

Front load means you pay all fees up front. Back load means you pay fees when you sell.

there is a fee for buying in or for selling. the most reasonable fee is 0%.

It is a sales fee and it is a waste of money. With a front load you pay when you buy. With a back load you pay when you sell.

There is absolutely no reason to buy a loaded fund. They just guarantee that you start out by losing money. Instead look at investing with no-load, low-fee fund companies like Vanguard, Fidelity or T. Rowe Price. Invest directly through the company so you avoid all sales fees.

Expenses should be below 1%/year and ideally below .5%.

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Good luck!
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