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The Different Classes of Mutual Funds

Mutual funds are a type of investment that comes in many different categories, allowing you to choose the most favorable category that meets your investment needs. All of these categories are divided into three main classes known as class A, B and C. The classes are based on charges that are subject to the purchase price of the shares. These charges include, but are not limited to, the sales charge, which is also known as a broker’s commission, annual expenses (service and distribution fees), and general administration fees.

After choosing the class of mutual funds to settle for, consider how much money you want to invest, as well as how long you want your money to stay in the investment plan. In other words, how long will it take before you pay back your shares? The first class of shares, class A, is best suited for people who want to have a long-term investment, characterized by a large number of shares. The charges for this share class are up-front, which means they are paid as you buy the shares. For example, suppose you want to invest $ 40,000 and the commission to collect is 5% of this value. This means that $ 2,000 will be deducted and the remaining $ 38,000 is what will be invested.

For class B shares, you may want to consider investing in them if you have a smaller amount of money that you want to invest, but for an extended period of time. The nice thing about class B shares is that they don’t charge upfront fees and as such all the money you want to invest goes into the mutual fund. However, they do have a final loading charge, which means that you will be charged when you repay your shares. This fee is also widely known as the Contingent Deferred Sales Charge. The value of the charge decreases throughout the year, which means you may be able to redeem your shares for free.

For example, if you buy $ 5,000 worth of class B shares with a final charge of 5%, the percentage will decrease, for example, by 1% and if you sell your shares in the second year, you will be charged 4%. . This tells you that if you decide to keep your shares for more than five years, you will not be charged anything as you redeem them. Class C shares are not that different from Class B shares, the only notable difference is that the final cargo charge typically takes only 12 months to reduce to zero. In other words, this class is best for large amounts of money that you intend to invest for a short-term goal. However, other charges for class C shares are generally higher than those for class B or A shares.

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