A, B, and C Shares
In addition, many load mutual funds provide a commission to the seller of the mutual funds. This commission can be paid in many ways and reflects how the customer is charged as well. If the commission is paid largely up-front, then that is a front-load mutual fund and the load is deducted “up-front", or at the time of purchase. Typically, this is called an A share.
With B shares, the commission is partly paid up front by the mutual fund company, but not by the purchaser. Instead, B shares are called back-load mutual funds and will charge the customer a fee if they sell the fund before a certain amount of time. In exchange for not paying the fee up front, the customer pays a higher expense ratio on an ongoing basis.
C Shares are sometimes referred to as level-load mutual funds. No fee is charged at purchase and no fee is charged when the fund is sold, although many funds come with a minimum holding period of 1 year. However, the annual fund expenses for a C share are typically around 1% higher than those of an A share. So, while the customer does not pay up front, they still pay the same amount or more than those who buy A shares over a certain time period.
FINRA (formerly the NASD) provides a share calculator that allows investors to calculate which share class is best for them based upon how long the fund is to be held. Investors would be wise to take a look before deciding which share class is right for them.