What is a 'C-Share'

A C-share is a class of mutual fund with a level load. Class C shares tend to not have front-end loads, but they often carry small back-end loads. These loads are typically around 1% and may vanish once the investor has held the shares of the mutual fund for a year.

BREAKING DOWN 'C-Share'

Class C shares often have lower expense ratios than class B shares but higher expense ratios than class A shares. Class C shares may be a good option for investors who plan to sell after a relatively short period but will hold the shares for at least a year.

Investors who plan to withdraw funds within a year may want to avoid C-shares because of the back-end load that is typically charged on short-term redemptions. The higher ongoing expenses associated with C-shares make them an unappealing option for long-term investors. Many mutual funds offer both low ongoing expenses and no front- or back-end loads, so it is easy to avoid the drawbacks associated with C-shares. Higher mutual fund fees are not associated with higher mutual fund returns.

Fees Associated with Class C Shares

In addition to the back-end load of contingent deferred sales charge (CDSC) associated with class C shares, these shares may also charge a 12b-1 fee. A fund charges a 12b-1 fee to cover its distribution and marketing costs. Total 12b-1 fees are capped at 1% annually and are reflected in the fund's expense ratio. Of the 1% fee, distribution and marketing expenses can be up to 0.75%, while service fees max out at 0.25%.

In many cases, the presence of 12b-1 fees for class C shares can push the overall annual expense ratio above 2%. That expense ratio is in addition to any potential back-end loads charged.

Example of a Fund Offering Class C Shares

The Calamos Growth Fund is an example of a fund with both class A and class C shares. The class A shares charge an expense ratio of 1.32%, 0.25% of which is a 12b-1 fee, and a maximum 4.75% front-end load that decreases based on the amount that is invested. The fund's class C shares don't have a front-end load, but they carry a maximum 1% CDSC on shares held less than one year. The class C shares also impose the maximum 1% 12b-1 fee, pushing the fund's overall expense ratio to 2.07%.

As a comparison, no-load funds, sometimes known as no-transaction fee (NTF) funds, typically have much lower fees. For example, the Fidelity Contrafund, when purchased through the Fidelity platform, charges an annual expense ratio of 0.71% without any front-end or back-end loads.

Some of criticized sales of Class C shares for long-term investments. The differences in final values of investments with varying fees can be immense when held for a long period of time. For instance, take a $50,000 investment in a fund that returns 6% and charges annual operating fees of 2.25%, held for 30 years. The final amount the investor will receive will equal $145,093.83. A fund with the same amount invested and same annual returns but with annual operating fees of 0.45% will offer the investor significantly more, with a final value of $250,832.55.

RELATED TERMS
  1. Load Fund

    Load funds charge fees of less than 1% in order to compensate ...
  2. 12B-1 Fee

    A 12b-1 fee goes toward paying for marketing, distribution and ...
  3. 12B-1 Plan

    A 12B-1 plan is a plan structured by mutual fund companies for ...
  4. Hidden Load

    A hidden load is an undisclosed fee or sales charge, which is ...
  5. Class B Shares

    Class B Shares are a classification of common stock that may ...
  6. Contingent Deferred Sales Charge ...

    A fee (sales charge or load) that mutual fund investors pay when ...
Related Articles
  1. Investing

    12b-1: Understanding Mutual Fund Fees

    Many mutual funds charge investors a 12b-1 fee to pay for marketing and promotion expenses.
  2. Investing

    The Lowdown on No-Load Mutual Funds

    No-load mutual funds let you cut out the middleman—and the fees.
  3. Investing

    Consider These Fees When Evaluating Mutual Funds

    The best way to evaluate a mutual fund is by digging a bit deeper into the fees charged.
  4. Investing

    Mutual Fund Fees: Here's What You're Paying For

    It is important to understand mutual funds fees so that you know what you are paying and to whom, and how that impacts your portfolio returns.
  5. Investing

    How to Buy Mutual Funds Online

    Learn how to buy mutual funds online. Discover which websites offer mutual fund trading services, how to choose a fund and typical fees.
  6. Retirement

    7 Reasons to Yank a Mutual Fund from Your 401(k)

    Not all mutual funds are created equal. Here are some practical tips for recognizing – and ditching– low-value mutual funds that might be in your 401(k).
  7. Investing

    New Rule Prompts Some Active Management to Cut Fees

    American Funds has filed with the SEC to create a new share class with lower fees.
  8. Managing Wealth

    How To Optimize Your Portfolio and Reduce Fees

    Investment fees aren't avoidable altogether, but there are strategies investors can employ to keep those fees at bay and reduce the impact on returns.
  9. Investing

    American Funds Vs. The Vanguard Group

    Here are the differences between two of the largest mutual fund families, American Funds and Vanguard Funds, and how the two companies' returns match up.
  10. Retirement

    How to Choose 401(k) Investment Options

    Consider these three factors when choosing investment options in your 401(k) plan.
RELATED FAQS
  1. How are a mutual fund's C shares different from A and B shares?

    Each class of mutual fund shares are distinguished by their specific load fees and structures, defined as A, B and C class ... Read Answer >>
  2. What's the difference between a load and no-load mutual fund?

    A mutual fund is simply a large group of people who lump their money together for a management company to invest. Shares ... Read Answer >>
Trading Center