Mutual Fund Classes

[Diolla]

My 457 Deferred Comp plan is changing AGAIN and I am confused-

I had some allocated to Funds with Class A and the new one is the same fund Institutional Class. There are also fund classes R-5 & R-4?

I don't know what these mean, the only ones I have seen before are A, B, & C. I will ask my advisor but she is hard to get ahold of and I am curious now.

Do any of you know? I googled it and didn't find anything yet.

[kv968]

Ah, the alphabet soup of investing

Class A shares normally have a high front end load but a lower expense ratio.

Class B shares typically don't have a front end load but have a higher expense ratio. They do however usually have a back end load that declines over the time you hold the fund. For example, if you cash in the fund the first year, the load may be 5% whereas if you wait 2 years it may be 3%. Usually after a period of time (~7 years) they may convert to Class A shares at which time they'd lose the back end load.

Class C shares are what most financial advisors will steer people towards since they don't have a front end load but a higher expense ratio than either A or B shares. They also never convert to a different class and the expense ratio never drops. Hense the advisor makes their money all along

Class R shares are true institutional shares in that the only way to access them is through investment dealers that have a special agreement worked out with the fund's distributor (ie. large pension or retirement plans). This class is great if you have access to them since there's no load and the expense ratio is the lowest of all the classes. I have one of these (American Funds) available to me through my 401k and I love it.

Granted, there may be some minor differences with different company's fees, time periods and class structures, but that's basically it. Hope that helped

[Broken Arrow]

Does this help?