Don't Get Loaded Down By Your Mutual Fund
(New Article Each Month

With mutual funds and their prospectuses, there is constant reference to "A" shares, "B" shares etc.

Although most often you will see references to  A, B, and C  classes of shares , Fidelity also has T shares, Putnam M shares, and Fortis also has H shares. You can even find Y and Z shares!

Until 1986, all mutual funds were either sold with a sales charge called a front-end load, or purchased directly from the fund company without a salesman's commission, and called of course a no-load fund. Basically that was the limit of things, two classes of funds - No Load or Load. 

In the late 1980's different mutual fund companies began adding other fees beyond the usual overhead charges and management fees. No-load giants such as Janus, Fidelity, and T. Rowe Price  created "advisor class" shares in addition to offering their straight up No Load offerings. This was an attempt to have the best of all worlds, offering no load funds to more sophisticated investors, yet offering the same funds under different class designations with higher fee structures in order to pay salesman to promote the funds. 

Here are the usual types of loads found on mutual  funds. If you see any of the following letters following a mutual fund listing it usually means that you are paying these extra fees...

Class A shares charge investors a front-end load, usually 4-5%

Class B shares charge no up-front commission, but charge redemption fee if the shares are redeemed within 5 years. 

Class C shares charge no up-front or back-end load, and usually no redemption fee.

There may also be other classes of shares with different combinations of fees. These would be are detailed in a fund's prospectus. As difficult and boring that most fund prospectuses are, be sure to always read them thoroughly and read the fine print! 

Smart investors should only ever buy a no-load funds. The Rydex index  mutual funds that we use for management at Lussenheide Capital Management Inc. are always  no load mutual funds that charge you neither a front end or back end commission load 




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