The Mutual Fund ABC - Part II

Class-A Shares
Class-A shares charge a front-end load that is taken off your initial investment.

Pros

• Lower 12b-1 fees - Class A shares tend to have lower 12b-1 fees, so if you plan on holding these shares for several years, a front-end load might be beneficial in the long run.
• Breakpoints - These provide a discount off regular front-end load rates each time your investment reaches a certain amount in a series. If the first breakpoint is $25,000, you could invest that amount initially to receive the first discount. (To learn more, read Break Free Of Fees With Mutual Fund Breakpoints.)
• Right of Accumulation - This gives you the opportunity to receive a discount on the front-end load if you reach the first breakpoint with the second installment. So, again, say that the first breakpoint is $25,000 and your initial investment is $10,000. If you invest $15,000 to reach the breakpoint on the second installment, you'd receive a discounted front-load fee.
• Letter of Intent - Some companies also offer front-end load discounts up front to individuals who initially express their intent to invest an amount over a certain breakpoint by a certain point in time.

Cons

• High Initial Investment Required - Investors who do not have the funds to reach a breakpoint before the deadline indicated by a letter of intent will have to pay regular front-end fees.
• Long Time Horizon Required - These funds are not optimal for investors with a short time horizon. For example, say your initial investment is $4,750 after $250 in front-load fees, and your investment increases 3% during the course of a year. If you liquidate at the end of the year, you would have actually lost $107.50 [(4750*1.03)-5000], or 2.15%.