Your question: Why do mutual funds have different classes of shares?

Why do funds have different share classes?

Different classes in a fund represent the different units the fund manager has created to suit certain types of buyers, for example, investors with HL or institutional investors such as pension funds and multi-manager funds. Each unit in the fund may have different costs and minimum investment levels.

What do the different class of shares mean for mutual funds?

Some mutual funds offer investors different types of shares, known as “classes.” Each class invests in the same portfolio of securities and has the same investment objectives and policies. But each class has different shareholder services and/or distribution arrangements with different fees and expenses.

What is the main difference between mutual fund share classes?

Each class of mutual fund shares is distinguished by their specific load fees and structures. The main difference between Class C shares and the other two mutual fund share classes is that Class C shares are level-load. This means the total amount of money the investor pays to the mutual fund is invested in shares.

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Why do mutual funds have different series?

Mutual funds are categorized into different “series” or “classes” which are designed to provide different benefits for investors and/or different compensation arrangements for the advisors who sell the fund.

Are Class A shares better?

KEY TAKEAWAYS. Class A shares charge upfront fees and have lower expense ratios, so they are better for long-term investors. Class A shares also reduce upfront fees for larger investments, so they are a better choice for wealthy investors.

What does a Class C fund mean?

Class C shares are a class of mutual fund share characterized by a level load that includes annual charges for fund marketing, distribution, and servicing, set at a fixed percentage. These fees amount to a commission for the firm or individual helping the investor decide on which fund to own.

What are Class D mutual funds?

Class D are “no-load” shares of mutual funds that often have sales loads (A & C shares). Investors choosing this option gain access to the fund without having to pay the initial fee or fees when they sell. Additionally, Class D shares often have lower expense ratios than their A and C twins, as well as no 12b-1 fees.

What is the difference between Class A and Class D shares?

Class D shares are less common than Class A, B or C, and their fee structure may vary greatly depending on the fund company. The most common setup involves a deferred, or back-end load, meaning a sales charge is taken when shares are sold. … Another Class D fee structure has no sales load, but has an annual fee.

What are Class A and Class C shares?

Class A and B shares are aimed at long-term investors, whereas Class C shares are for beginning investors who aim for short-term gains and may have less money to invest. Class C shares, especially those with no load, are the least expensive to purchase, but they will incur higher fees in the long term.

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Are Class B shares worth anything?

Understanding Class B Shares

Class B shares typically have lower dividend priority than Class A shares and fewer voting rights. However, different classes do not usually affect an average investor’s share of the profits or benefits from the company’s overall success.

What is Alphabet Class A and Class C?

Class A: Held by a regular investor with regular voting rights (GOOGL) Class B: Held by the founders with 10 times the voting power compared to Class A. Class C: No voting rights, normally held by employees and some Class A stockholders (GOOG)