by Farmers’ Almanac Staff | Sunday, January 1st, 2006 | From: Blog

Investors have a variety of ways to save for the future. Whether its funding retirement or saving for big purchases in the long-term, choosing an investment depends on the length of the investment, budget and expectations of performance versus the risk involved.

Mutual funds are one investment option. But each mutual fund is different. Pay careful attention to which will best fit your investment needs.

Mutual funds are divided into three classes: Class A, B and C.

- Class A Shares typically have a front-end sales charge, meaning a portion of the dollars you pay to purchase the shares is used to pay a sales charge at the time of purchase. Front-end sales charges are one-time events. Class A shares may also impose an asset-based management fee, though it is generally the lowest of all the classes. Class A mutual funds offer discounts, called breakpoints, on the front-end sales charge is you make a large purchase, already hold other mutual funds in the same fund family or commit to purchasing more shares.

- Class B shares typically do not have a front-end sales charge, so the full amount you pay is immediately invested. Their asset-based management fees are generally higher than other class shares.

Also, there is a contingent-deferred sales charge

(CDSC) or back-end surrender charge when you sell your shares. This declines over time and after a certain period the Class B shares can be converted to Class A shares without a front end sales charge. There is a limit with each mutual fund family as to how much you may invest in Class B shares.

- Class C Shares usually do not have a front-end sales charge. Class C shares often impose a CDSC if you sell your shares within a short time of purchase. Class C shares typically have the highest asset-based management fees and this is not reduced over time.

Class C shares cannot be converted to Class A shares.

Determining which class of shares you should purchase requires careful consideration. Consider the size of your purchase, over what period of time you are planning to invest and your other mutual fund investments.

With offices in New York and Savannah, Barbara Treadwell has more than 20 years of experience in the financial arena. A Certified Financial Planner, Treadwell embraces the LEAP Systems principals of coordinating and integrating assets for improved rates of return, tax savings and better protection against the eroders of wealth.

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