When you invest in mutual funds through a broker (or another advisor who receives commissions):
Class A shares carry the traditional upfront sales load.
Class B shares have “back-end loads.” These shares carry no upfront charges but you will pay if you leave in the first few years. The fund’s expenses are higher than on A shares until the deferred sales charge goes away. After that time, B shares typically convert into lower-cost A shares.
Class C shares carry no front- or back-end sales charge but they do carry higher costs than A or B shares. Those costs, which include ongoing compensation for the advisor, stay higher forever. The result of the Class C expense structure: higher costs, which lead directly to lower returns.
C shares are always the worst choice in the long run. When are C shares the appropriate choice? Only if you are using a fund to time the market and planning to hold on for a short stretch of time. In that scenario, the higher ongoing expenses are cheaper than paying a sales load, coming or going.
