Dictionary : Breakpoint Sale
The sale of a mutual fund at a set dollar amount that allows for the fundholder to move into a lower sales charge bracket. If an investor is unable at the time of investment to come up with the funds necessary to qualify for the lower fee they can sign a letter of intent stating they will reach the total amount, or breakpoint, in a set time period.
Any sales that occur just below a breakpoint are considered unethical and in violation of NASD rules.
An example of a breakpoint sale would be where an investor plans to invest $95,000 in a front-load mutual fund and they face a charge of 6.25% or $6,125. If they are properly advised they will be told that if they add $5,000 for a total investment of $100,000, they'll qualify for a lower sales charge of 5.5%, or $5,500. This means they will essentially have $5,625 more invested than the initial purchase plan due to the savings in sales charges.
See other terms from our Dictionary:
# | A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z