A 5% front load on a $20,000 purchase means $1,000 goes to the distributor and $19,000 buys shares. The investment must gain 5.26% just to return to the original amount.
Loads exist to pay the adviser or broker who sold the fund. Breakpoints reduce the percentage at higher amounts, and rights of accumulation can aggregate a household's holdings to reach one. Where a load exists, ask who receives it and what ongoing service it buys.
Load-bearing classes usually sit alongside no-load-fund alternatives holding the same portfolio, so the question is whether the advice is worth the charge rather than whether the fund is worth owning. See back-end-load and twelve-b-one-fee.
Related: back-end-load, no-load-fund, twelve-b-one-fee, fee-drag, management-fee