Say Goodbye to Class-B Mutual Fundshttp://www.fool.com/investing/brokerage/2010/01/04/say-goodbye-to-class-b-mutual-funds.aspx Selena Maranjian
January 4, 2010
Mutual funds are a great tool for investors -- provided they don't come with a hefty price tag. Fortunately, one often costly type of mutual fund has started to disappear.
A mutual fund may exist in several different classes of shares -- usually A, B, and/or C, with a few other options on occasion. In addition to the annual fees all funds charge, Class A shares generally sock you with a front-end load, which can be as high as 5.75% or higher. On a $10,000 investment, you'd fork out $575 from the get-go just to cover the load. Class C shares offer lower loads, but compensate with higher annual fees, which can rack up far greater costs over time.
With Class B shares, the load you'd pay up front for Class A shares is instead spread out over the first few years that you own the fund. If you sell your shares before you finish those payments, the fund company will collect the balance from whatever you make from your sale. That sounds like a sweet deal for fund companies -- so why have many of them recently begun to phase out Class B shares?