Deferred Sales Charge, also called Back-End Load
and abbreviated to DSC
, is a type of commission
charged on mutual fund
purchases. When you purchase a DSC fund, you don't pay out any commission, but if you redeem the fund before a certain time (commonly 6 years), you'll pay a percentage of the redemption amount (this is brutal if your fund has increased in value, which of course you hope it will) as commission at that time. The percentage you pay varies over time - it usually starts around 5 or 6%, and is adjusted down each year until the last year when it drops to 0%. As such, DSC funds are suitable for long-term investors - if you're not sure if you might redeem the fund or want to change fund companies, you should go with a Front-End Load
or No Load
fund. Usually there is an FE version of all DSC funds with identical performance. Not all companies offer No Load funds - those that do generally ONLY offer No Load funds. There is usually no DSC fee charged to switch from one DSC fund to another within the same fund family.
Other types of mutual fund commission include Front-End Load (FE), which is also called Initial Sales Charge (ISC); and No Load (NL).
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