| In order to get the most out of your returns, | | | | stocks because they are not required to pay |
| without paying a high fee, you need to be aware | | | | front end fees and the deferred sales charge |
| of the different classes of mutual fund stocks | | | | keeps reducing. The other benefit is that these |
| and their advantages and disadvantages. Mutual | | | | stocks are automatically converted into Class 'A' |
| fund companies often charge a higher fee when | | | | stocks, which have a lower yearly management |
| you opt to invest in 'high risk high return' stocks. | | | | expense ratio or MER. The only problem with |
| However, paying higher fees does not necessarily | | | | Class 'B' stocks is that you are required to pay |
| ensure high returns because stock prices fluctuate | | | | the deferred sales fees in case you withdraw the |
| on a daily basis. This makes it difficult even for | | | | funds before the specified period. Another |
| professional fund managers to predict the future | | | | disadvantage is that you do not avail of discounts, |
| course of a certain stock. Mutual fund classes | | | | since there are no provisions for a breakpoint. |
| show the type of stocks covered under each | | | | This means that you are not able to reduce |
| mutual fund and the fees charged. The most | | | | investment costs even if you increase your |
| common mutual fund classes are A, B, and C. | | | | investment. |
| Class 'A' Stocks | | | | Class C Stocks |
| These types of stocks attract lower 12b-1 fees | | | | These types of stocks work best for those |
| and are considered the best if you are planning to | | | | planning to redeem the stocks within a short span |
| keep investment for two or more years. | | | | of time. They are beneficial because you are not |
| Investing in such stocks makes you eligible to | | | | required to pay the front-end fees. The back-end |
| receive discounts, every time your investment | | | | load is less too, one percent in most cases. Even |
| arrives at a certain amount. The amount is | | | | this one percent back-end load is eliminated if you |
| selected at the time of buying the mutual fund | | | | keep the investment for more than a year. Some |
| and is referred to as the 'breakpoint'. Discounts | | | | of the drawbacks of Class 'C' stocks include |
| are also offered when you express the intent of | | | | compulsory back-end load, higher MER, zero |
| reaching the breakpoint within a specified period. | | | | discounts and lack of provision for automatic |
| However, in case you are unable to reach the | | | | conversions. |
| breakpoint prior to the deadline, as mentioned in | | | | In order to benefit from your investments, you |
| the 'letter of intent', you are required to pay the | | | | need to consider a number of factors, such as |
| regular front-end fees. | | | | the time for which you plan to invest, the |
| Class B Stocks | | | | frequency of your investments and whether you |
| These types of stocks are characterized by their | | | | are liable to withdraw the funds in the near future. |
| contingent deferred sales charge and are | | | | The analysis of the benefits and drawbacks of |
| appropriate for investors who have limited | | | | each class of stocks will help you to select the |
| resources and are looking for long term | | | | most appropriate investment option, based on |
| investment. Small investors prefer these types of | | | | your specific needs and preferences. |