What is the purpose of breakpoint sales in mutual funds?

What is the purpose of breakpoint sales in mutual funds?

• A. To encourage large purchases
• B. To increase sales commissions
• C. To avoid higher sales charges
• D. To promote long-term investments

Answer: (C)

The purpose of breakpoint sales in mutual funds is to avoid higher sales charges. Breakpoints are specific investment amounts that allow investors to qualify for reduced sales charges when purchasing shares in a mutual fund. The breakpoint system is designed to incentivize larger investments by lowering the costs associated with buying into the fund. This approach benefits investors by allowing them to retain more of their investment, as lower sales charges mean that a smaller portion of their purchase is deducted for fees. By understanding breakpoints, investors can structure their investments in a way that minimizes these charges and maximizes their potential returns.

The purpose of breakpoint sales in mutual funds is to avoid higher sales charges. Breakpoints are specific investment amounts that allow investors to qualify for reduced sales charges when purchasing shares in a mutual fund. The breakpoint system is designed to incentivize larger investments by lowering the costs associated with buying into the fund. This approach benefits investors by allowing them to retain more of their investment, as lower sales charges mean that a smaller portion of their purchase is deducted for fees. By understanding breakpoints, investors can structure their investments in a way that minimizes these charges and maximizes their potential returns.