Mutual fund share classes are different share variations of the same fund that investors can purchase. Each share class has different characteristics that typically involve how their fees are structured.
Mutual Fund Share Class
What is a share class?
- Mutual fund share classes provide investors different fee and expense ratio options.
- A-, B-, and C-class shares are the three most common options.
Mutual fund share classes are classes of different shares an investor can purchase to invest in a mutual fund. These share classes differ by the fees and expense ratios they offer to investors. There are three common iterations of mutual fund share classes: classes A, B, and C.
Class A shares have higher up-front fees (front-end load) and lower expense ratios. They also tend to provide discounts on their up-front fees if investors invest with high initial amounts. They favor wealthy investors or investors that intend to hold shares for a long time.
Class B shares have no up-front fees but have the highest expense ratios compared with classes A and C. They also have sales-deferred fees (back-end load) that will be charged when selling the shares. The sales-deferred fees drop the longer investors hold these shares. B-class shares will convert to A-class shares after a certain amount of time.
Class C shares have no up-front fees and an expense ratio that is higher than A-class shares, but lower than B-class shares. They also have a small sales-deferred fee, but this fee is usually waived after a year. They do not convert to any other share class. Class C shares are therefore better suited for short-term investors.