DEFINITION of 'Service Shares'

Mutual fund units that charge service fees to their shareholders. The purpose of these fees is to compensate individuals who answer investor inquiries and provide information to the public or to investors about the fund. FINRA (formerly the NASD) limits funds from charging service fees in excess of 0.25% of their average net assets per year.

BREAKING DOWN 'Service Shares'

Some mutual funds charge investors front-end or back-end loads. Others charge service fees to cover internal expenses for people that answer shareholder questions and inquiries. Because these fees occur consistently year after year, they can have a significant adverse impact on returns over time.

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