How are Mutual Funds priced?

Mutual funds are generally priced with a combination of Sales Charge (also known as Load) and Total Annual Operating Expenses (a percentage of total assets that the mutual fund charges for managing the fund).  Some funds may also have a Contingent Deferred Sales Charge (CDSC also know as a back-end Load).  The most common funds are listed below.  It is important to remember that there is always a cost which is outlined in the prospectus.

 

  • A Shares - A front end sales charge and usually a comparatively lower annual operating expense.  No CDSC.
  • B Shares - No front end sales charge and usually a comparatively higher annual operating expense.  A CDSC is usually charged for some period of time (i.e. 5, 6, 7 years), however, after some period of time after the CDSC has expired, most B Shares will convert to A Shares and charge the lower annual operating expense.
  • C Shares - No front end sales charge and usually a comparatively higher annual operating expense.  A CDSC, usually 1%, will be charged for 1 year only.  C shares do not convert to another class, so the operating expenses will remain the same.  C Shares are often used for shorter investment time frames.