n order to get the most two or more years. Investing in
out of your returns, such stocks makes you eligible to
without paying a high fee, receive discounts, every time
you need to be aware of the your investment arrives at a
different classes of mutual fund certain amount. The amount is
stocks and their advantages and selected at the time of buying
disadvantages. Mutual fund the mutual fund and is referred
companies often charge a higher to as the ‘breakpoint’. Discounts
fee when you opt to invest in are also offered when you express
‘high risk high return’ stocks. the intent of reaching the
However, paying higher fees does breakpoint within a specified
not necessarily ensure high period. However, in case you are
returns because stock prices unable to reach the breakpoint
fluctuate on a daily basis. This prior to the deadline, as
makes it difficult even for mentioned in the ‘letter of
professional fund managers to intent’, you are required to pay
predict the future course of a the regular front-end fees.
certain stock. Mutual fund
classes show the type of stocks Class B Stocks
covered under each mutual fund
and the fees charged. The most These types of stocks are
common mutual fund classes are A, characterized by their contingent
B, and C. deferred sales charge and are
appropriate for investors who
Class ‘A’ Stocks have limited resources and are
looking for long term investment.
These types of stocks attract Small investors prefer these
lower 12b-1 fees and are types of stocks because they are
considered the best if you are not required to pay front-end
planning to keep investment for fees and the deferred sales
charge keeps reducing. The other is less too, one percent in most
benefit is that these stocks are cases. Even this one percent
automatically converted into back-end load is eliminated if
Class ‘A’ stocks, which have a you keep the investment for more
lower yearly management expense than a year. Some of the
ratio or MER. The only problem drawbacks of Class ‘C’ stocks
with Class ‘B’ stocks is that you include compulsory back-end load,
are required to pay the deferred higher MER, zero discounts and
sales fees in case you withdraw lack of provision for automatic
the funds before the specified conversions.
period. Another disadvantage is
that you do not avail of In order to benefit from your
discounts, since there are no investments, you need to consider
provisions for a breakpoint. This a number of factors, such as the
means that you are not able to time for which you plan to
reduce investment costs even if invest, the frequency of your
you increase your investment. investments and whether you are
liable to withdraw the funds in
Class C Stocks the near future. The analysis of
the benefits and drawbacks of
These types of stocks work best each class of stocks will help
for those planning to redeem the you to select the most
stocks within a short span of appropriate investment option,
time. They are beneficial because based on your specific needs and
you are not required to pay the preferences.
front-end fees. The back-end load
About the Author:
Joe Kenny writes for the UK Loans Store, offering applications for secured loans and also debt consolidation loans and other loan topics available on site.
Read more articles by:
Joseph Kenny
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