As an investor you may be looking to grow your portfolio through mutual funds, but do you know how a fund’s share class will impact the cost of your investment? With about 7,600 mutual funds available, some with 15 or more share classes to select from, the information abundance can be overwhelming. To simplify things, let’s take a look at the three most common share classes for individual investors – Class A, B, and C shares.
Class A shares usually have a front-end sales charge, or “load.” This amount, which can vary depending on how much you invest, is deducted from your initial investment. Additionally, Class A shares can charge an annual 12b-1 fee, which is deducted from plan assets on an annual basis and is included as part of the fund’s expense ratio.
Unlike Class A shares, Class B shares don’t have a front-end sales charge. That being said, B shares usually have higher 12b-1 fees. They also charge Contingent Deferred Sales Charges (CDSCs) if your shares are sold within a certain timeframe post-purchase.
Class C shares, like B shares, don’t typically have a front-end sales charge. C shares have a lower CDSC than B shares, but their 12b-1 fees are very high – in the 0.75-1% range. Because of these high ongoing fees, investors should carefully evaluate the costs of C shares.
As an individual investor, there’s a lot of research to do and information to remember. Clarity Financial is here to help. Feel free to contact us, or for more information and advice on Class A, B, and C shares, see our article in the Columbia Daily Tribune, “The ABCs of share classes.”
As a financial planner specializing in comprehensive financial planning, Tim enjoys helping clients in Columbia, MO with managing their taxes, financial risks and other financial issues.
If you would like to learn more about this and other personal financial planning topics serviced by Clarity Financial please contact us at 573-447-7007. Clarity Financial, LLC is a fee-only financial advisory firm in Columbia, MO. Appointments are welcome and initial consultations are free.
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This article is the property of Clarity Financial LLC.
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