A Woman's Guide to Mutual Fund Classes

It’s a crazy world we live in- especially when it comes to investing. It seems that just when we get a handle on the current situation, something else gets thrown into the mix to add confusion and instability to an already nerve-racking experience.  Take Mutual Fund Classes- it seems like they do this just to make it even more confusing.

A Mutual Fund is a financial “medium” made up of groups of investors all pooling their money into one common ground with the hopes of making a solid return on their investment.  These investors, for one reason or another, don’t pick out stocks and bonds and such on their own, but rather join forces in this “fund”. One fund manager takes care of all of the investing procedures for the bunch. Different funds will yield higher risks, depending on where the investment is made by the fund manager-the higher the risk, the better potential return for all involved.

While there are several different classes of Mutual Funds, it’s important for you to know that in this type of investment, the classes simply mean how the attached fees are assessed.  That’s it.  So with this in mind, we’re going to tackle the three most popular classes: A, B and C.


This type of fund is considered a Front-end Load which simply means that fees are paid up front and come off of your initial investment.  These fees can be high if you don’t invest a serious amount of cash ($25,000 is the first level where you could get a discount on the fees.) You could, however, write a “letter of intent” to your investor promising to add additional funds within a specific timeframe that you don’t have at the beginning.  If you don’t have the money at that time, however, you’d better plan on coughing up the cash.

p> It’s best to leave your investment alone for a few years so you can recoup any fees that you paid upfront, otherwise it’s just not worth it. Of all classes, A-shares have the lowest 12b-fees (a small fee for marketing, promoting and selling the fund, typically .5-1.0%). 

B- Shares

Remember “B” for Back-End or Contingent Deferred Sales Charge. These types of Mutual Funds are very popular with those without a lot of up-front cash an lot of time to reap what the investment sows. No up front fees means all of your money is invested.  Deferred Sales Charge means the longer you hold onto your shares, the lower your sales charge. A long-time commitment of 5-8 years and higher management fees do steer some potential investors to other classes of Mutual Funds. However, Class B converts to Class A after a certain period of time, so the higher management fees issue may not be an issue.

C- Shares

These Level-Load shares would make you think that you pay fees both in the beginning and end- equally.  Wrong! The load fees are only applied to the back, they’re relatively small in comparison (about 1%) and they disappear after a full year.  Class C-shares cannot convert to A-shares- ever, meaning a high management fee for the rest of its existence. This translates into a good short-term investment, but not something you’ll want to hang on to for several years. 

Return to homepage.