Saturday, January 8, 2011

Allocation Rate

The allocation rate refers to the net initial investment that an investor makes in a fund; it subtracts any upfront fees, e.g. if a fund had a front-end load or sales charge of 3.5% then the allocation rate would be 96.5% (i.e. only 96.5% of the investor's initial investment would actually be invested). The allocation rate simply affirms the negative impact that a front-end load or sales charge has on an investor; an investor should seek to maximize their allocation rate. Index funds generally carry the highest allocation rate.

Synonyms: Net initial investment

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