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C and B Classes of Mutual Fund Shares
May Be More Costly Than A Shares
Understanding which class of mutual fund to buy is not easy.
A shares typically assess a "front-end", one-time charge of between 3% to 6% at purchase. B shares typically have a deferred or "back-end" contingent charge that starts at about 5% or 6% and declines about one percentage point per year until it reaches zero, and have higher annual expenses. C shares carry no front-end charge, but charge the highest annual expenses. A recent study shows that the amount invested as well as the period of investment are key factors in selecting which share class to purchase.
For buy and hold investors, C shares may be the most expensive. A shares are preferred, especially with large investments.
Likewise, recently the NASD fined Stifel, Nicholas & Co. for recommending B shares when A shares would have been cheaper. B shares can be more expensive than A shares for large purchases. One major brokerage firm, for example, now bars brokers from selling B shares (in lieu of A shares) in amounts over $100,000. One factor sometimes overlooked is that "breakpoints" give investors a discount on large A share purchases.
Source: Wall Street Journal
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Sponsored by James J. Eccleston, an attorney representing stockbrokers, financial planners and
investors nationwide in arbitration, litigation and regulatory matters, and a shareholder with the law firm
Shaheen, Novoselsky, Staat, Filipowski & Eccleston
P.C.(www.snsfe-law.com). This Web site contains material
of general interest. It is neither intended to, nor constitutes, either legal advice or investment advice.
Always consult an attorney and/or investment advisor when building and protecting your wealth.
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