2025 IFSE Canadian Investment Funds Course Practice Test – Comprehensive Exam Prep

Question: 1 / 400

What is typically referred to as a sales charge in mutual fund investing?

A penalty for selling shares too quickly

A fee paid to purchase shares of a mutual fund, often termed a "load"

The term "sales charge" in mutual fund investing specifically refers to a fee that an investor pays when purchasing shares of a mutual fund. This fee is commonly known as a "load." A load can be either front-end or back-end, with a front-end load being charged at the time of purchase, while a back-end load is charged at the time of sale, typically if shares are sold within a certain period. This sales charge serves as compensation for the sales personnel who facilitate the sale of the fund or for the distribution costs that the fund incurs.

Understanding this concept is critical in mutual fund investing as it affects the investor’s return. It informs the investor about any upfront costs associated with their investment decision, which can influence their choice of funds based on their investment horizon and overall strategy. Other options do not align with the specific definition of a sales charge, as they pertain to different fees or costs associated with mutual funds.

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A fee for managing a mutual fund

An expense ratio charged annually

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