When checking for different quotes on mutual funds, you might see different prices for classes of mutual fund shares that seem to be holding similar or identical products. These different classes - 'A', 'B' and 'C' - all are characterized by their different load structures.

'A' shares generally denote a front-load charge. This load is generally fixed for the duration of the fund and will vary depending on the different types of mutual funds. Fund companies recognize that the front load is a deterrent to investors, so to sweeten the attractiveness of the fund, they may reduce the management expense ratios (MER). Thus, some funds claim that, even though you are paying a large fee up front, you will end up saving money if you decide to hold this fund for a long duration.

The 'B' shares normally are deferred-load funds. In many instances this deferred load will dissipate along a schedule so that the longer you hold the fund, the smaller the deferred load becomes. When the deferred fund no longer has back-end charges, it will normally be reclassified as an 'A' share. It may seem advantageous to purchase and hold the 'B' class until the load structure completely dissolves, but this is not necessarily the case. Fund companies may circumvent lost profits by charging a higher MER.

The 'C' shares are constant-load funds. Regardless of the number of years the fund is held, the load charge is present. Since this fund's load is lower than both the 'A' and 'B' classes, it generally also has a higher expense ratio to offset the fund company's lost revenue; furthermore, 'C' shares typically do not reclassify into 'A' shares, which means that the purchaser of these shares will be stuck paying the full load when he or she sells the fund.

Keep in mind that fund companies will denote their multi-class mutual funds differently, but the letters we refer to above are the most common classifications. When you are looking to purchase a new fund, it's definitely important that you understand the load structure and availability of different classes. Also, remember that loads don't automatically get you a higher return. In fact, most evidence suggests that no-load funds are almost always a better choice.

(To learn more about mutual funds and their fees, check out our Mutual Fund Basics Tutorial.)

  1. How liquid are Vanguard mutual funds?

    The Vanguard mutual fund family is one of the largest and most well-recognized fund family in the financial industry. Its ... Read Full Answer >>
  2. Which mutual funds made money in 2008?

    Out of the 2,800 mutual funds that Morningstar, Inc., the leading provider of independent investment research in North America, ... Read Full Answer >>
  3. Does OptionsHouse have mutual funds?

    OptionsHouse has access to some mutual funds, but it depends on the fund in which the investor is looking to buy shares. ... Read Full Answer >>
  4. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
  5. How do mutual funds work in India?

    Mutual funds in India work in much the same way as mutual funds in the United States. Like their American counterparts, Indian ... Read Full Answer >>
  6. When are mutual fund orders executed?

    Whether buying or selling shares of a fund, mutual fund trades are executed once per day after the market close at 4 p.m. ... Read Full Answer >>
Related Articles
  1. Mutual Funds & ETFs

    The Democratization of the Hedge Fund Industry

    The coveted compensations of hedge fund managers are protected by barriers of entry to the industry, but one recent startup is working to break those barriers.
  2. Retirement

    Two Heads Are Better Than One With Your Finances

    We discuss the advantages of seeking professional help when it comes to managing our retirement account.
  3. Professionals

    A Day in the Life of a Hedge Fund Manager

    Learn what a typical early morning to late evening workday for a hedge fund manager consists of and looks like from beginning to end.
  4. Mutual Funds & ETFs

    American Funds' Top Funds for Retirement

    Planning for retirement in this economic and investment environment is far from easy. American Funds might offer an answer.
  5. Investing Basics

    5 Tips For Diversifying Your Portfolio

    A diversified portfolio will protect you in a tough market. Get some solid tips here!
  6. Entrepreneurship

    Identifying And Managing Business Risks

    There are a lot of risks associated with running a business, but there are an equal number of ways to prepare for and manage them.
  7. Active Trading

    10 Steps To Building A Winning Trading Plan

    It's impossible to avoid disaster without trading rules - make sure you know how to devise them for yourself.
  8. Mutual Funds & ETFs

    Buying Vanguard Mutual Funds Vs. ETFs

    Learn about the differences between Vanguard's mutual fund and ETF products, and discover which may be more appropriate for investors.
  9. Mutual Funds & ETFs

    ETFs Vs. Mutual Funds: Choosing For Your Retirement

    Learn about the difference between using mutual funds versus ETFs for retirement, including which investment strategies and goals are best served by each.
  10. Mutual Funds & ETFs

    The 8 Most Popular Vanguard Funds for a 401(k)

    Learn about some of the mutual funds in Vanguard's lineup that are popular among 401(k) investors, and find out why you should consider them.
  1. Benchmark

    A standard against which the performance of a security, mutual ...
  2. Equity Risk Premium

    The excess return that investing in the stock market provides ...
  3. Alpha

    Alpha is used in finance to represent two things: 1. a measure ...
  4. Equity

    Equity is the value of an asset less the value of all liabilities ...
  5. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  6. Series 6

    A securities license entitling the holder to register as a limited ...

You May Also Like

Hot Definitions
  1. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  2. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  3. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  4. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  5. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  6. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
Trading Center