Front-end fees refer to the fees paid by investors when they purchase funds, and the payment fees increase with the increase of subscription amount; Back-end fees refer to the fees that investors need to pay when redeeming funds, which will decrease with the increase of investors' holding time.
Difference between front-end billing and back-end billing
1, payment time is different.
The front-end fee is paid at the time of subscription, and the back-end fee is paid at the time of fund redemption.
2. Different payment methods
The front-end fee pays the percentage rate of the subscription amount of the fund. The higher the subscription amount, the more fees are paid. Back-end payment will reduce the percentage of handling fee with the increase of investor holding time.
Which is better, front-end charge or back-end charge?
Many fund companies introduce back-end fees to encourage investors to invest for a long time. Therefore, the main advantage of back-end charging is that investors are prepared for long-term investment, so choosing back-end charging can reduce costs and save costs compared with front-end charging.
For example, A and B each invested 10000 yuan and bought the same fund at the same time. A chooses front-end charging, and B chooses back-end charging. After three years, when they reach a certain expected return, they will be redeemed together. What's the difference between their expected returns?
Cost variance:
A: The subscription rate is 1.5%, the redemption rate is 0.3%, *** 1.8%.
B: The redemption rate is 0.2%, the subscription rate is 0.8%, *** 1%.
A is more than B 10000 * 0.8% = 80 yuan.
Share difference
Because B is the back-end fee, it buys more fund shares than A. Specifically, when it was purchased three years ago, the net value of fund shares on the day of purchase was 1 yuan, and B paid the subscription fee first and then purchased the fund.
A's fund share =10000/1=10000;
Fund share of B =10000 * (1-1.5%)/1= 9850.
A pays a higher redemption fee than B.
Therefore, long-term investment can choose back-end charges, and short-term investment can choose front-end charges. This is about how to distinguish between front-end charges and back-end charges. That's all. I hope it helps you.