If you rely upon a broker or a financial planner who receives commissions, you should be aware that many mutual funds with sales charges offer A, B, and C shares.
A shares are the traditional load fund. You might invest $10,000 and have $9,600 in your account, after a 4 percent load.
B shares have a hidden load. If you invest $10,000, you’ll see $10,000 in your account but if you withdraw money shortly you’ll have to pay a surrender charge. Depending on the fund, the surrender charge might be 4 percent within one year, 3 percent within two years, and so on.
C shares start out with the full $10,000 but charge you an extra 1 percent per year, which goes to the broker or planner. Some investors might be better off with the C shares because the advisor gets less upfront but more in the future. This may help keep your advisor interested in you. If you start out with B shares, at the end of five years you should move to A shares, which have lower expenses.
