When investors buy mutual funds through their brokers, it usually involves choosing among different share classes. The only difference between share classes is the amount of fees the broker will be paid and the amount of expenses the funds will charge. Oftentimes, investors are persuaded into purchasing Class B mutual fund shares when it may not be cost-effective for them, particularly when the trade plus assets already managed by that family exceeds $100,000.00. By purchasing B shares, investors may also be forgoing breakpoint discounts they are eligible for.
Class B shares do not impose a front-end sales fee or "load" that is deducted at the moment of investment - unlike Class A shares, all of the investor's money will be put to work. B share owners do incur higher 12b-1 fees (to cover marketing and distribution costs) than A shares, and B shares also impose a contingent deferred sales charge (CDSC), which the investors will pay if he or she sells shares within a certain number of years. The CDSC typically reduces each year, and is usually eliminated after six or more years. Selling class B shares during the period in which the CDSC applies can significantly diminish the overall return of the investment.
Mutual fund investors must be aware that when purchasing large amounts of B shares, normally over $50,000, they cannot take advantage of breakpoint discounts that may be available to them in A shares. Abuses regarding B share sales have been reported and are currently under investigation. That is why investors interested in investing an amount of cash large enough to qualify for breakpoints should discuss with their brokers whether A shares would be a better option than B shares.
Do you believe your purchase of Class B shares resulted from an improper sale? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
Class B shares do not impose a front-end sales fee or "load" that is deducted at the moment of investment - unlike Class A shares, all of the investor's money will be put to work. B share owners do incur higher 12b-1 fees (to cover marketing and distribution costs) than A shares, and B shares also impose a contingent deferred sales charge (CDSC), which the investors will pay if he or she sells shares within a certain number of years. The CDSC typically reduces each year, and is usually eliminated after six or more years. Selling class B shares during the period in which the CDSC applies can significantly diminish the overall return of the investment.
Mutual fund investors must be aware that when purchasing large amounts of B shares, normally over $50,000, they cannot take advantage of breakpoint discounts that may be available to them in A shares. Abuses regarding B share sales have been reported and are currently under investigation. That is why investors interested in investing an amount of cash large enough to qualify for breakpoints should discuss with their brokers whether A shares would be a better option than B shares.
Do you believe your purchase of Class B shares resulted from an improper sale? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
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