Question

Front-end load VS Back-end load

I asked the professor which one is better and she said that it depends on your time horizon.

So, which one is better for short-term and why??

And which one is better for long-term and why??

Answer 1

If we are investing for shorter duration then, front and load will be better because it will be directly deducted of the initial investment into the funds and hence we will be adjusting our overall cost which is involved in the investment so we are investing for a shorter duration and we should not be taking higher risk because our time duration is low and the probability of maximization of very high rate of return is also lower, so we will be preparing to pay fees from our cost at the initial stage.

If we are investing for the longer duration then, we will be preparing back end load because we are investing for a longer period of time and there is a very high probability of maximization of the rate of return because of higher time duration and hence if we are adjusting our back end load with our profits then also we will be making a hefty sum of money, so it is always better to have a back end load at the time of the longer duration investments