Class C Share

Demystifying Class C Shares: Understanding Fees, Pros, and Cons

Class C shares in mutual funds offer investors a unique set of advantages and drawbacks. This comprehensive guide explores the intricacies of Class C shares, shedding light on their fee structure, suitability for different investment horizons, and real-world examples.

Navigating the World of Class C Shares

Class C shares are distinguished by their level sales load, which is assessed annually as a fixed percentage of assets under management. Unlike front-end or back-end loads, Class C shares entail ongoing charges, making them suitable for investors with intermediate-term investment horizons.

Understanding the Fee Structure of Class C Shares

The fees associated with Class C shares, also known as 12b-1 fees, encompass marketing, distribution, and servicing expenses. While these fees provide compensation to intermediaries involved in selling mutual fund shares, they can significantly impact the overall expense ratio borne by investors.

Pros and Cons of Investing in Class C Shares

Class C shares offer advantages such as no upfront commissions and reduced back-end loads over time. However, their high expense ratios and back-end charges on short-term redemptions make them less favorable for long-term investors pursuing a buy-and-hold strategy.

Who Should Consider Investing in Class C Shares?

Investors seeking to maximize returns over an intermediate investment horizon, typically between one to three years, may find Class C shares suitable. However, individuals planning short-term redemptions within a year or those prioritizing long-term wealth accumulation may explore alternative investment options.

Examining a Real-World Example: The Calamos Growth Fund