Skip to main content
U.S. flag

An official website of the United States government

Dot gov

The .gov means it’s official.
Federal government websites often end in .gov or .mil. Before sharing sensitive information, make sure you’re on a federal government site.


The site is secure.
The https:// ensures that you are connecting to the official website and that any information you provide is encrypted and transmitted securely.

Updated Investor Bulletin: Mutual Fund Classes

Updated February 24, 2021

The SEC’s Office of Investor Education and Advocacy is issuing this Investor Bulletin to provide investors information about mutual fund classes.  This bulletin addresses some of the fees that may apply to certain common mutual fund classes, but please note that mutual funds may have other fees and expenses that you should take into account when making an investment decision. If a financial professional has discretionary authority to invest in mutual funds on your behalf, these same considerations about fees and expenses apply and you should raise them with your financial professional. For more information on mutual fund fees and expenses, read our Investor Bulletin: Mutual Fund Fees and Expenses.

What are Mutual Fund Classes?

A mutual fund is an investment company that pools money from many investors and invests in securities such as stocks, bonds, and short-term debt. Many mutual funds offer different types of shares, known as "classes."  Each class of shares of the mutual fund invests in the same "pool" (or investment portfolio) of securities, but each class may have different fees and expenses.  This means that owning a different class of the same fund will result in different investment returns. The effect of different fees on different mutual fund share classes is compounded over time.

Mutual funds allow eligible investors to pick a share class with a fee and expense structure that best fits their investment goals, which may include the time that they expect to remain invested in the fund and how they wish to purchase shares (e.g., through a financial professional – such as a broker-dealer or an investment adviser -- versus directly through a brokerage account or the mutual fund company).  The more fees you pay, the less money is invested in the mutual fund share class and the less you will earn – now and over time.  So, it is important that you invest in a mutual fund class that is appropriate for your financial situation and that you understand the fees associated with that share class.  Also, the appropriate share class for you might change over time, for example, as your financial situation changes, or as new mutual fund classes are introduced.

What Types of Mutual Fund Classes Are There?

This bulletin discusses some of the common types of mutual fund share classes that investors can purchase.  For some types of share classes, the mutual fund may charge a fee when you purchase shares of the fund, when you sell shares of the fund, or both.  These fees are known as “sales loads” or “sales charges.”  These “sales loads” or “sales charges” are in addition to any transaction fee that may be charged when you buy or sell shares.  These classes of funds also pay 12b-1 fees, which are part of the fund’s ongoing operating expenses paid out of the fund’s assets to cover the costs of marketing and selling fund shares. Sales loads, sales charges, transaction fees, and 12b-1 fees all generally compensate the financial professional who sells you shares in the fund.

Some mutual funds also offer share classes with no sales load. These classes may be available for purchase in various ways, such as directly through a brokerage account or a mutual fund company or within an advisory account (i.e., an account managed by an investment adviser for a client).  However, like all classes, no-load classes still have ongoing operating costs, such as management fees, transfer agent fees and other operating expenses including, in some cases, 12b-1 fees.  In addition, transaction fees may be charged by the broker when buying or selling some no-load share classes. 

Common Classes With Sales Loads and 12b-1 Fees         

  • Class A shares might have a front-end sales load paid as a percentage of the purchase price, which may be discounted if certain criteria are met (e.g., a minimum amount is invested).  Class A shares may also be offered without the front-end sales load (“load waived”) to certain investors such as those investing through an advisory account.  Class A shares also have a 12b-1 fee, although this fee would generally be lower than the 12b-1 fee for certain other load bearing classes.
  • Class C shares might have a 12b-1 fee and a contingent deferred sales load (CDSL) (a percentage-based fee that investors pay only when they redeem fund shares) for some period of time (often a year).  Because Class C shares generally have a higher 12b-1 fee than other load bearing classes, you could end up paying more if you hold these shares for a long time.
  • Class B shares with a CDSL and a higher 12b-1 fee, but no front-end sales load were once relatively common.  However, Class B shares are no longer widely available.

No-load Classes

  • Retail no-load shares may go by a variety of different names.  These classes of shares are commonly available to retail investors directly through a brokerage account, fund family or within an investment advisory account. There is typically no transaction fee charged to the investor upon purchase, but the class of shares may pay 12b-1 fees.
  • Institutional Shares (Class I) may have some of the lowest ongoing operating expenses, but there could be relatively high initial investment minimums and/or transaction fees to invest directly through a brokerage account.  However, many mutual funds make these shares available to retail investors without requiring a high initial investment minimum through various means, including through an employer (e.g., through a retirement plan) or through an investment advisory account.  Taking advantage of Class I shares, if they are available to you, might be a good way to reduce your overall cost of investing in the mutual fund. 
  • Retirement share classes are typically only available through an employer-sponsored retirement plan, such as a 401(k).  Mutual funds may offer more than one retirement share class with different levels of ongoing operating expenses including those with and without 12b-1 fees.

Additional types of classes may also exist for some funds and may be a better fit for your needs, so do your homework and comparison shop.  Whenever a fund offers several classes, you should consider which class is best for you. Keep in mind that the share class with the lowest initial fees may not be the share class with the lowest fees over time.

What Factors Should You Consider in Selecting a Mutual Fund Class?

Here are a few factors to consider when choosing a share class:

  • Account Type.  Consider if you want to invest in the mutual fund directly (e.g., through a brokerage account or mutual fund company) or whether you would like help from a broker representative or an investment adviser.  You can learn more about the difference between brokers and advisers at  Some share classes may only be available for purchase from a full service broker-dealer, while other classes may be offered through other means, like directly through a brokerage account or within an advisory account.
  • Your Financial Position.  Consider how much you plan to invest in mutual funds and how long you plan to hold those investments.  For share classes with a front-end sales load, you may qualify for a reduced sales load, or “breakpoint discount,” if, for example, you or you and eligible family members:
    • Make a large purchase;
    • Commit to regularly purchasing the mutual fund’s shares or purchasing a certain amount of the mutual fund’s shares in the future; or
    • Reach or surpass a “rights of accumulation” breakpoint, which is a discount offered when the dollar amount of mutual fund shares purchased plus the amount already held, often including mutual funds of the same fund family, equals a pre-determined threshold.
  • Your Investment Size and Time Horizon.  Consider the size of your investment, how long you expect to own the mutual fund and your need to access the money you invested when you think of the trade-off between share classes that charge front-end sales loads, CDSLs, and ongoing fees.  Smart planning may help reduce the total amount of money you pay in sales charges and other fees over time.
  • Fees and Expenses Paid to a Financial Professional.  Be aware that certain fees and expenses, like sales loads, 12b-1 fees, and CDSLs will likely compensate a financial professional who helps you purchase or sell shares.  Your financial professional could receive more or less compensation depending on the share class you purchase. Accordingly, your financial professional may limit which share classes are available, and this may be because of compensation they receive from the funds or their sponsors. What you can do:
    • Evaluate the share classes of the mutual funds that your financial professional recommends.  If a fund offers multiple classes, it may describe them all in a single prospectus, or it may describe them in separate prospectuses.  If there are multiple share classes that pay different fees and expenses, ask your financial professional why they chose or recommended that share class for you.
    • Consider your financial professional’s potential conflicts of interest.  Financial professionals that offer services to retail investors provide information about their conflicts of interest, including with respect to fees and expenses, in their relationship summary.  Investment advisers also provide certain information about conflicts of interest in their brochure and brochure supplement.  Under Regulation Best Interest, broker-dealers are also required to address conflicts of interest when they make recommendations to retail customers, including through disclosure, mitigation, and elimination.

You should decide which share class best fits your investment goals after careful consideration of the information disclosed in the prospectus (or prospectuses).  You can obtain prospectuses from the SEC’s Electronic Data Gathering, Analysis, and Retrieval (“EDGAR”) database or directly from the fund (most funds provide their prospectus on their websites and also have toll free numbers where you can request a copy). 

To figure out how the costs of mutual fund classes add up over time and to compare the costs of different classes, you can use the FINRA Fund Analyzer.


Whether or not you purchase shares of a fund with sales charges, these are not the only fees and expenses you will pay to invest in a mutual fund.  You should always consider your total cost of an investment, including sales charges, 12b-1 fees and other operating expenses.  Be sure to review your account statement(s) regularly, read the mutual fund prospectus and ask your financial professional to explain all of the sales charges, fees and expenses that may apply. 

Additional Information

Relationship Summaries (Form CRS or Form ADV Part 3)

How Fees and Expenses Affect Your Investment Portfolio

FINRA's Updated Investor Alert--Understanding Mutual Fund Classes

How to Read a Mutual Fund Prospectus (Part 1 of 3: Investment Objective, Strategies, and Risks)

How to Read a Mutual Fund Prospectus (Part 2 of 3: Fee Table and Performance)

How to Read a Mutual Fund Prospectus (Part 3 of 3: Management, Shareholder Information, and Statement of Additional Information)

Information Available to Investment Company Shareholders

For additional investor educational information, see the SEC’s website for individual investors,   

This bulletin represents the views of the staff of the Office of Investor Education and Advocacy.  It is not a rule, regulation, or statement of the Securities and Exchange Commission (“Commission”).  The Commission has neither approved nor disapproved its content.  This bulletin, like all staff guidance, has no legal force or effect: it does not alter or amend applicable law, and it creates no new or additional obligations for any person.
Return to Top