Mutual Fund Pricing

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Mutual Fund Pricing

Many mutual fund companies offer a variety of share classes to investors. Each share class carries a different fee structure. The key factors to consider in selecting among share classes are investment amount, time horizon, fund expenses, and the goals, attitudes, and investment styles that best fit your needs.

Sales charges for "A shares" include front-end loads, which are deducted directly from the amount invested into the mutual fund. The front-end load is a fee paid by an investor when purchasing shares in the mutual fund and is expressed as a percentage of the amount to be invested. Mutual fund "A shares" typically provide volume discounts so that the front-end load is reduced for investors making larger investments.

Sales charges for "B shares" include higher annual expenses as well as back-end or surrender charges. Back-end charges are assessed when an investor sells his or her shares. Such charges typically apply only to redemptions made within the first six to eight years of purchase and are assessed on a declining scale during the surrender period (e.g., 5% for redemptions made in the first year after purchase, 4% for the second year, etc.). After this time period, the "B shares" of some fund groups may convert to "A shares." Typically, mutual fund "B shares" should be considered by investors with smaller amounts to invest, who want the entire purchase amount to be invested immediately and who prefer to spread the cost of investing over several years.

Mutual fund "C shares" should be considered by investors who wish to avoid initial charges and those who prefer plain and simple pricing in the form of "pay-as-you-go" charges. In addition, the contingent deferred sales charge period is generally one year. Such investors must understand that, while there is no initial sales charge, "C share" annual fund expenses are higher than both "A" and "B share" fund expenses. "C shares" should also be considered by investors who have a relatively short or uncertain investment time horizon, who want their entire investment to go to work immediately without deduction of a sales charge and who wish to avoid a surrender charge upon liquidation of the fund.

Your financial situation, goals, risk tolerance, and time horizon are critical considerations in deciding among mutual share class options. Before you purchase a mutual fund, please read the prospectus carefully. This will provide you with more complete information including the actual sales charges and expenses associated with that mutual fund.

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