Class A shares, which usually charge a front-end load but no back-end load, may come with a reduced 12b-1 expense but normally don’t come with the maximum 1% fee. Class B shares, which typically carry no front-end but charge a back-end load that decreases as time passes, often come with a 12b-1 fee.
What are 12 B 1 fees?
So-called “12b-1 fees” are fees paid out of mutual fund or ETF assets to cover the costs of distribution – marketing and selling mutual fund shares – and sometimes to cover the costs of providing shareholder services. 12b-1 fees get their name from the SEC rule that authorizes a fund to charge them.
Do Class A shares cost more?
Class A shares are intended largely for retail investors, and are the most common share class in the mutual fund space. These funds may seem costly in the beginning but become relatively less expensive when held over the long term, since they have a front-load but no back-load upon sale.
Do Class A shares have a CDSC?
Class-A shares typically have no CDSC, while Class-B shares often have the potential for a sales charge upon the sale of shares. Class-C shares may have a lower front-end or back-end load but carry a higher overall expense ratio.
How do I avoid 12b-1 fees?
As a reminder, the typical 12b-1 fee is 0.25%, and the maximum charge for 12b-1 fees is 1% annually. Of course, the easiest way to protect your investments is to work with a fiduciary financial advisor – or, even better, a fee-only fiduciary advisor.
Are 12b-1 fees good or bad?
Funds that charge 12b-1 fees believe they help increase a fund’s value through marketing and building demand. However, whether that’s true is up for debate. Critics say 12b-1 fees do nothing to increase the value of a fund or boost its demand, making the fees feel like an unnecessary upcharge.
Can an investment adviser receives 12b-1 fees?
Registered investment advisory firms that are dually registered, i.e., registered as both investment advisers and broker-dealers, can receive 12b-1 fees as part of the brokerage function. Additionally, many IARs of such firms are registered both as IARs and as registered representatives.
How are 12b-1 fees calculated?
Mutual fund companies base the 12B-1 fee calculations on the fund’s average annual net assets. To calculate the net assets of a mutual fund, subtract the fund’s current liabilities from the market value of its holdings. A fund’s current liabilities include fund management fees and broker commissions.
Are Class A shares worth it?
KEY TAKEAWAYS. Class A shares charge upfront fees and have lower expense ratios, so they are better for long-term investors. Class A shares also reduce upfront fees for larger investments, so they are a better choice for wealthy investors.
Are Class A shares better?
When A Shares Are Best
Long-term investors (more than five years, at least, and preferably more than 10) will do best with class A share funds. Even though the front load may seem high, the ongoing, internal expenses of class A share funds tend to be lower than those of B and C shares.
Can anyone buy Class A stocks?
Class A shares refer to a classification of common stock that was traditionally accompanied by more voting rights than Class B shares. Traditional Class A shares are not sold to the public and also can’t be traded by the holders of the shares.