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Mutual Fund Education
Brian Mathews Apr 03, 2018
However, there are more than 6,000 mutual funds available to the public, which makes the task of choosing a fund a sometimes daunting task. Mutual funds also have several share classes, which determines the fee structure of the fund. Let us go over a newly introduced share class in the mutual fund space.
Another popular fund share class is the C share, which is the level-load option. In the level-load, the deferred fee is 1% and then, after 12 months, the fee charges an annual 12b1 fee of 1%. This is a great option for investors not looking to get hit with a large upfront fee; however, holding a C share fund for a long period of time will cost more than purchasing an A share.
The final share class is the I share, which is meant to be bought on the institutional level and is not available to the common investor except through a brokerage’s advisory or managed account. This share class allows the clients of a brokerage firm to buy an I share mutual fund at the fund’s NAV price and purchase or redeem at any point without penalty. The brokerage would typically charge an advisory fee for its services, instead of charging an upfront or level load through the mutual fund. I shares typically also have a lower expense ratio than both A and C share class mutual funds.
To know more details about the mutual fund share classes, click here.
These funds were created to help the self-guided investor gain access to professional money management without needing a broker. If an investor does their own research and decides that a certain mutual fund might be their best option, a D or N share class would undoubtedly be the best option and by far the most cost effective.
A share (JDBAX) will be worth $14,776 or 38.55% increase.
C share (JABCX) will be worth $15,135 or 40.86% increase.
N share (JABNX) will be worth $15,965 or 45.95% increase.
As you can see by the comparison, over time the N share is the clear leader and the most cost efficient share class for an investor who is capable of self-guidance and purchasing the funds without the help of a broker or investment advisor.
However, the D share class funds are becoming less popular. There are still a few D shares available but many are closed to new investors. N shares seem to be a more popular share class for no-load funds, which is almost the exact same thing as the D share class.
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