Front-end charge refers to the payment method of paying the subscription fee when you buy an open-end fund.
Back-end charge refers to the payment method of not paying the subscription fee when buying an open-end fund and then paying it when selling it.
Then why is there a distinction between front-end and back-end?
Back-end fees are designed to encourage you to hold funds for a long time. Therefore, the rate of back-end fees will generally decrease with the growth of funds you hold. Some funds even stipulate that if the fund can be sold after a certain period of time, the back-end fee can be completely exempted. Mind you, the back-end charge is different from the redemption fee.
Back-end charges, like front-end charges, are all a kind of subscription fees, but they are not paid when buying funds, but when selling funds. Therefore, if you buy a fund with back-end charges, you must pay the subscription fee in the form of back-end charges in addition to the redemption fee when you sell the fund.
Which fund is better, front-end or back-end?
Many fund management companies have no front-end and back-end charging methods for holders to choose from, and investors have no initiative to choose, so they can only accept front-end charging methods to pay commission fees. However, in order to attract investors and encourage long-term investment, some companies will develop front-end and back-end charging methods for investors to choose from. Basically, all funds with two charging methods will provide some preferential measures to investors with back-end charging-if investors hold funds for a long time, it will generally be more than five years.
For investors, "buying funds" can be divided into two situations, one is to subscribe for new funds, and the other is to buy old funds. This situation is known in the industry as subscription. Because fund management companies will introduce many promotional measures when subscribing, the subscription rates will be different, but at present, the subscription rates of various funds are generally fixed. The front-end fees are basically 65438+ 0.5% of the subscription amount, and the back-end fees are 65438+ 0.8% of the relevant amount (insufficient 1 year; More than 1 year and less than two years is 1.5%).
We use this as a standard to calculate the difference between the fees before and after (the redemption fee is 0.5%).
Let's take a look at the calculation formula of back-end subscription fee:
Back-end subscription fee = redeemed subscription share × net fund value on the day of subscription × back-end subscription rate. Another formula for calculating the redemption fee is: redemption fee = redemption share × redemption date fund net value × redemption rate.
Suppose you subscribe to a fund with a back-end fee model of 654.38+10,000 yuan, and its net value on the subscription date is 1 yuan. In less than two years, when the net value reaches 1. 1 yuan, you will redeem it all. Then it can be discussed in three situations. First, the fund has never paid dividends during the period; 2. After paying dividends (assuming that 65,438+00% of the income is completely lost, the same below), if you choose the cash method, the net value at the time of redemption will still be 65,438+0 yuan; Third, you decide to turn dividends into investment, and the net value at the time of redemption is 1 yuan. If calculated according to the back-end subscription rate 1.5%.
The fees to be paid at the time of redemption are:
100000×/kloc-0 /×1.5%+100000×1.1× 0.5% =1500+550 =
100000×/kloc-0 /×1.5%+100000×1× 0.5% =1500+500 = 2000 yuan;
11000×1×1.5%+1000×1× 0.5% =1650 = 2200 yuan.
If the front-end charging mode is selected under the same assumption, the corresponding transaction costs are as follows:
100000× 1× 1.5%+98500× 1. 1× 0.5% = 1500+54 1.75 = 20465438+
100000×/kloc-0 /×1.5%+98500×1× 0.5% =1500+492.5 =1992.5 yuan;
100000× 1× 1.5%+ 108350× 1.5% = 1500+54 1.75 = 204 1.
From the above calculation, it can be found that if investors need to redeem the fund in a short time, the cash dividend and front-end fee costs are the lowest, and the back-end fee costs are the highest. The difference between them is 2200- 1992.5= 207.5 yuan per 65438+ ten thousand yuan. If the investor redeems within 1 year, the amount listed in the previous three formulas will be higher, because the rate will be 1.8%.