What is the primary difference between Class A shares and Class B shares of a mutual fund?

The primary difference between Class A shares and Class B shares of a mutual fund lies in how the fees are structured. Class A shares typically come with a front-end sales charge, meaning that investors pay a percentage of their initial investment as a commission at the time of purchase. This upfront fee reduces the amount of money that is immediately invested in the fund.

In contrast, Class B shares do not have a front-end sales charge but instead have a contingent deferred sales charge (CDSC). This means that if an investor sells the shares within a certain period, usually several years, they need to pay a fee based on how long they have held the shares. The CDSC decreases over time and typically disappears after a set period, allowing investors to avoid any upfront costs but subjecting them to potential expenses when they eventually liquidate their investment.

This structure makes Class A shares more convenient for investors who plan to hold their investment for a longer term without anticipating the need to sell soon, while Class B shares may be a suitable choice for those who want to avoid upfront fees and are willing to pay if they decide to sell before the CDSC period expires.