|
| Loads and Share Classes: Load 'Em Up |
| When a contractor replaces your roof, there are many ways to pay for the service. You could pay the tab up front in cash, charge it and then shell out a little each month, or write a check for the whole amount when you get the bill. Similarly, there are many ways a mutual fund charges you the sales commission (or load) your broker has earned for selling you a fund. |
|
| Loads come directly out of your investment. For example, if you invested $10,000 in a fund with a 5% front-end load, your broker would receive $500 and the fund would invest the remaining $9,500. Back-end, or deferred, loads work in a similar fashion, except they are paid when you sell from a fund. There are also distribution and marketing fees you pay each year called 12b-1 fees. |
|
| Funds are generally categorized into a different share classes based on the fees they charge and how they structure those fees. And each share class gets a letter. The table below can help you make sense of the mutual fund alphabet, while the calculator shows you which share class is best for you to buy depending on how long you plan to own the fund |
|
| Keep in mind that not every fund charges a load. No-load funds are sold directly by the fund company instead of through a broker and they generally don't have different share classes. Finally, some funds also charge a redemption fee. While these fees are charged when you sell your shares, like deferred loads, the money goes back into the fund, rather than to a broker or the fund company. |
|
| At Morningstar Investment Management LLC, we put a good deal of emphasis on mutual fund costs, not only because investors aren't always aware of them, but also because we think favoring lower-cost funds is an easy way to improve your long-term results. We've found that over long time periods, lower-cost funds tend to outperform higher-cost funds. And costs are the only thing about a fund that are absolutely predictable, year in and year out. |
|
|
> Home
> Glossary > Support |
