The costs of buying
No-load funds,
which you buy directly from a mutual fund company
or other fund sponsor, have no sales charges, or commissions.
If you buy a mutual fund through a financial
adviser, it will probably be a
load fund,
which means you pay a sales charge, typically between
2% and 5% of your investment amount.
With a
front-end load
you pay the commission when you make a purchase,
and sometimes on your dividend reinvestments as well. With a
back-end load
you pay when you redeem, or sell, your shares. With
level-load
funds, you pay a percentage of your account value each year you
own the fund.
When a fund offers you a choice of when to
pay the load, it typically identifies front-end loads as Class
A shares, back-end loads as Class B shares, and level-loads as
Class C shares.
Choosing Class B shares so you pay what's called a contingent deferred sales charge only if you leave the fund within a few years may seem attractive, but it may be more expensive. That's because the asset-based operating fees for Class B shares are higher than for Class A shares. After several years, though, Class B shares typically convert to Class A shares and the lower fees apply.
You can ask your financial adviser if there is a chart or graph comparing the relative costs of the share classes.
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