Mutual Fund Classes - Why it matters?

Class A

Class A shares typically have a front-end load or a charge that is incurred when you buy the shares. The fees are charged as a percentage of the amount invested and sometimes can be lower if you are buying more shares.

Class B

Class B shares normally impose a contingent deferred sales charge, or back-end load that can decline the longer you hold your shares. Now, while this might seem to be a less expensive way to buy shares, it can pay to check what other fees are charged. According to the National Association of Securities Dealers Class B shares may have higher expenses than Class A shares. Additionally there may be a sales charge when the Class B shares are sold. If held for a long enough time, Class B shares often convert to Class A shares with lower operating expenses.

Class C

Class C shares, which often are used for asset allocation, do not charge a front-end fee but do typically charge higher operating expenses than Class A shares. Additionally there may be a sales charge if you sell within a certain period of time. If Class C shares are held for a long time, the costs could be higher than either Class A or Class B shares.

Technorati Tags: Investing