Contingent deferred sales charge

Contingent deferred sales charge

A contingent deferred sales charge, or CDSC, may be imposed on a sliding scale, with higher costs being assessed for shares sold more quickly after acquisition. CDSCs are usually calculated as a percentage of the shares’ entire value. 

Mutual fund companies generally impose the CDSC to recoup the costs of selling the fund. They are typically assessed on shares sold within a specific time frame after purchasing them.  

CDSCs can vary significantly from one fund to another, so it’s important to understand how they work before investing. 

What is the CDSC?

The CDSC is a fee that may be imposed on certain types of investments when they are sold. This fee is typically assessed by mutual fund companies and is based on a percentage of the sale price.  

The CDSC is generally assessed on investments that are held for less than a certain period, typically 5 years. This fee is designed to discourage investors from selling their investments too soon. 

It’s also possible to avoid CDSCs by holding onto your shares for the long term. If you’re unsure whether a CDSC will be imposed on your investment, it’s best to ask the fund company before investing.

How does CDSC work?

The CDSC is typically assessed on a sliding scale, with lower fees charged for longer holding periods. The CDSC is designed to discourage investors from frequently buying and selling fund shares, and to offset the costs associated with such activity. 

CDSCs can be a significant expense for investors who are unaware of them or do not hold their shares for the long term. For example, if an investor buys $10,000 worth of shares in a fund with a 5% CDSC and sells them one year later, he will owe $500 in CDSCs. This can eat into the investment returns realized by him. 

How is CDSC calculated?

We know that the CDSC is a fee some mutual fund companies charge when an investor redeems (sells) shares before a specific period. The time period is typically five to seven years. The CDSC declines over time and is usually zero after a specified period. 

CDSC is calculated as a percentage of the redemption amount and is typically in the range of 1% to 4%.  

For example, if an investor redeems $10,000 of mutual fund shares with a CDSC of 2%, the investor would pay a $200 CDSC. 

Effects and purposes of the CDSC

The purpose of the CDSC  is to discourage investors from selling their shares too soon after purchasing them. 

CDSCs usually decline over time, and they’re often waived altogether if the investor holds onto their shares for a certain number of years. However, if an investor does sell his shares before the CDSC expires, they may be subject to a fee of 1% or more. 

While CDSCs can deter short-term investors, they can also incentivize long-term investors to hold onto their shares. By keeping investors in the fund for an extended time, CDSCs can help ensure that the fund has the resources it needs to grow and perform well over the long term. 

Examples of how CDSC works

There are a few situations where you may be subject to a CDSC. 

For example, when you sell your mutual fund shares within a specific time frame after purchasing them, you may have to pay a CDSC. This charge is typically a percentage of the sale price and is designed to deter investors from selling their shares too soon.  

Another situation in which you may be subject to a CDSC is if you redeem your shares before a specific date. In this case, the CDSC is designed to compensate the fund company for the costs associated with early redemption. 

For example, a fund company might charge a 5% CDSC on shares sold within the first year after purchase, and a 3% CDSC on shares sold between one and two years after purchase. CDSCs can be expensive for investors who sell their shares early, so it’s essential to consider them before investing. 

Frequently Asked Questions

The CDSC formula calculates the fees charged on certain mutual fund sales. The formula takes into account the length of time that the investor has held the fund and the size of the investment. The fees are generally lower for investors who have held the fund for a long time or have made a larger investment.

A contingent deferred sales load is a type of sales charge that may be assessed on certain mutual fund shares if sold within a specified period. This sales charge is typically evaluated on shares sold within a year of purchase. 

A CDSC fee is a fee charged by a broker when selling specific securities, including mutual funds. The broker charges the fee to offset the costs associated with providing the service, including the costs of research, analysis, and marketing. The fee is typically charged as a percentage of the sale price of the security and is paid by the investor at the time of the sale. 

A CDSC charge annuity is a type of investment product that charges an upfront fee and then imposes a deferred sales charge if the investor sells the product within a specific time frame. The fee is typically a percentage of the investment’s value, and the time frame is typically five to seven years. After the initial fee is paid, the investor can typically sell the product without paying any additional fees. 

Related Terms

    Read the Latest Market Journal

    From $50 to $100: Unveiling the Impact of Inflation

    Published on Apr 12, 2024 35 

    In recent years, inflation has become a hot topic, evoking strong emotions as the cost...

    Japan’s Economic Resurgence: Unveiling the Tailwinds Behind Nikkei 225’s Record Leap

    Published on Apr 11, 2024 52 

    Source: eSignal, Intercontinental Exchange, Inc. In the heart of Japan’s economic landscape, the Nikkei 225...

    Weekly Updates 8/4/24 – 12/4/24

    Published on Apr 8, 2024 92 

      This weekly update is designed to help you stay informed and relate economic and...

    What Makes Forex Trading Attractive?

    Published on Apr 2, 2024 172 

    In a world where the click of a button can send goods across oceans and...

    Weekly Updates 1/4/24 – 5/4/24

    Published on Apr 1, 2024 93 

    This weekly update is designed to help you stay informed and relate economic and company...

    How to soar higher with Positive Carry!

    Published on Mar 28, 2024 124 

    As US Fed interest rates are predicted to rise 6 times this year, it’s best...

    Why 2024 Offers A Small Window of Opportunity and How to Position Yourself to Capture It

    Published on Mar 28, 2024 171 

    With the Federal Reserve (FED) finally indicating rate cuts in 2024, we witnessed a significant...

    Weekly Updates 25/3/24 – 29/3/24

    Published on Mar 25, 2024 75 

    This weekly update is designed to help you stay informed and relate economic and company...

    Contact us to Open an Account

    Need Assistance? Share your Details and we’ll get back to you


    This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) pursuant to a separate engagement before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.  

    An ETF is not like a typical unit trust as the units of the ETF (the “Units“) are to be listed and traded like any share on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors may buy or sell the Units on SGX-ST when it is listed. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. Creation and redemption of Units are through PDs if investors are clients of the PDs, who have no obligation to agree to create or redeem Units on behalf of any investor and may impose terms and conditions in connection with such creation or redemption orders. Please refer to the Prospectus of the ETF for more details.  

    Investments are subject to investment risks including the possible loss of the principal amount invested. The purchase of a unit in a fund is not the same as placing your money on deposit with a bank or deposit-taking company. There is no guarantee as to the amount of capital invested or return received. The value of the units and the income accruing to the units may fall or rise. Past performance is not necessarily indicative of the future or likely performance of the Products. There can be no assurance that investment objectives will be achieved.  

    Where applicable, fund(s) may invest in financial derivatives and/or participate in securities lending and repurchase transactions for the purpose of hedging and/or efficient portfolio management, subject to the relevant regulatory requirements. PCM reserves the discretion to determine if currency exposure should be hedged actively, passively or not at all, in the best interest of the Products.  

    The regular dividend distributions, out of either income and/or capital, are not guaranteed and subject to PCM’s discretion. Past payout yields and payments do not represent future payout yields and payments. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value (“NAV”) of the Products. Please refer to <> for more information in relation to the dividend distributions.  

    The information provided herein may be obtained or compiled from public and/or third party sources that PCM has no reason to believe are unreliable. Any opinion or view herein is an expression of belief of the individual author or the indicated source (as applicable) only. PCM makes no representation or warranty that such information is accurate, complete, verified or should be relied upon as such. The information does not constitute, and should not be used as a substitute for tax, legal or investment advice.  

    The information herein are not for any person in any jurisdiction or country where such distribution or availability for use would contravene any applicable law or regulation or would subject PCM to any registration or licensing requirement in such jurisdiction or country. The Products is not offered to U.S. Persons. PhillipCapital Group of Companies, including PCM, their affiliates and/or their officers, directors and/or employees may own or have positions in the Products. Any member of the PhillipCapital Group of Companies may have acted upon or used the information, analyses and opinions herein before they have been published. 

    This advertisement has not been reviewed by the Monetary Authority of Singapore.  


    Phillip Capital Management (S) Ltd (Co. Reg. No. 199905233W)  
    250 North Bridge Road #06-00, Raffles City Tower ,Singapore 179101 
    Tel: (65) 6230 8133 Fax: (65) 65383066