Key Takeaways. Share class refers to different types of company or mutual fund stock; they are designated by letter or by name. Different classes of company shares often carry different privileges, such as voting rights. Different classes of mutual fund shares incur differing fees and expenses.
There are three share classes (Class A, Class B and Class C) which carry different sales charges, 12b-1 fees and operating expense structures.
Class A and B shares are aimed at long-term investors, whereas Class C shares are for beginning investors who aim for short-term gains and may have less money to invest. Class C shares, especially those with no load, are the least expensive to purchase, but they will incur higher fees in the long term.
Companies create different share classes for the following reasons: To keep control of the company and retain strategic decision-making (usually by founder members) To attract investment. To direct dividend income to certain shareholders and determine income distribution patterns.
Each class within the fund charges different fees in an effort to provide a variety of fee structures that fit the varying needs of Registered Investment Advisors, Broker/Dealers and individual investors. The different fees charged for each share class account for some of the differences in daily net asset value (NAV).
Shares meaning and Types:
A share is referred to as a unit of ownership which represents an equal proportion of a company’s capital. A share entitles the shareholders to an equal claim on profit and losses of the company. There are majorly two kinds of shares i.e. equity shares and preference shares.
Understanding Class B Shares
Class B shares typically have lower dividend priority than Class A shares and fewer voting rights. However, different classes do not usually affect an average investor’s share of the profits or benefits from the company’s overall success.
A class of fund shares without any front-end load, deferred sales charge, or other asset-based fee for sales or distribution.
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.
Can I buy Class A stock?
Traditional Class A shares are not sold to the public and also can’t be traded by the holders of the shares. Traditional Class A shares are only one type of Class A share, and companies are free to structure themselves differently.
Class C shares are a type of mutual fund shares. … This means the total amount of money the investor pays to the mutual fund is invested in shares. Instead of paying a percentage of the initial investment as a commission, the investor pays the mutual fund commissions via annual fees.
Dividends are usually issued to shareholders in proportion to the value of shares they own. It’s also possible to shares in different classes, known as alphabet shares. Using these can allow companies to be more flexible when paying dividends, so they don’t have to pay everyone the same amount.
Most companies will find that having one share class is easier to manage, this is because all shareholders have the same voting rights at shareholders’ meeting, also dividends are in proportion to the shares issued.
What do 12 B fees pay?
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.
The new F3 shares will be free of commission, 12b-1 fees, as well as the sub transfer agency fees that typically go to brokerage platforms. … This marks the third commission-free F-share class for American Funds, which has $1.4 trillion under management and approximately 50 mutual funds.
Class C Shares
Unlike B shares, they typically do not convert to class A shares and, instead, continue to charge higher annual expenses (including 12b-1 fees) for as long as the shares are held.