Mutual funds may be divided into classes depending on the loads, or sales charges, and management fees, or expenses charged for running the mutual fund. Loads are sales charges to compensate the sales force for selling the fund. Loads directly reduce the amount of money invested by the amount of the load.

While there are differences of opinion as to the choice of load versus no-load funds, generally research has found that the performance of load funds and no-load funds is identical over the periods analyzed. However, when the sales charges are included, no-load funds significantly outperform load funds (see Matthew R. Morley, “Should You Carry a Load? A Comprehensive Analysis of Load and No-Load Mutual Fund Out-of-Sample Performance,” Journal of Banking and Finance, Vol. 27, Number 7 (2003), pp. 1245-71).

While there are differences in classes of shares among investment management companies which charge loads, they generally are:

Class A Shares: These shares commonly have a front-end or back-end load (a sales charge) to compensate for the sales person’s commissions. Because of the high front- or back-end loads they usually have lower management fees. Watch the load!

Class B Shares: These shares commonly only have a back-end load that is paid only when the shares are sold. This back-end load traditionally declines over time. Class B shares generally have higher expense ratios when compared to Class A shares.

Class C Shares: These shares generally have a lower front- and back-end load fees, but higher management fees.

Class R Shares: These shares are generally for retirement purposes. Check the loads and management fees which may be substantial.

No-Load Shares: These are shares sold without a commission or sales charge. Generally, this type of mutual fund share is distributed directly by the investment management company, instead of going through a sales channel. They may have higher management fees to compensate for the lack of a front- or back-end load if these shares are offered by an investment management company which offers shares with loads.

Class Y Shares: These are shares with very high minimum investments, i.e., $500,000, but which have lower management fees and waived or limited load charges. These are generally for institutional investors.

Class Z Shares: These are shares only available for employees of the fund management company