# A Shares

## What it is:

A shares are a type of mutual fund share.  They are distinguished from B Shares and C Shares by their load (fee) structure.

## How it works (Example):

A shares have a "front-end load" fee structure. A certain percentage of the initial investment is taken out as commission up front. Therefore, the total amount invested in the mutual fund is the initial investment amount less the commission.

have a "back-end load." This means that the entire initial investment amount is invested into mutual fund shares, but when the investor is ready to sell the shares, a certain percentage is deducted and paid to the mutual fund as commission. Therefore, the investor receives less than the total value of the investment when the shares are sold. B shares can be converted into A shares if the investor decides the front-end load payment structure is more advantageous.

have a "level-load" fee structure. This means the full amount of money paid to the mutual fund is invested in shares, but commissions are paid annually. This level-load structure is unique to C shares. Also -- unlike B shares -- C shares are cannot be converted into A shares.

Let's look at an example to clarify the concepts:

Joe invests \$1,000 into A shares of a mutual fund. He buys A shares with a 5% commission. With their front-end load structure, 5% of Joe's \$1,000 investment would be deducted immediately as commission. Only \$950 of Joe's money would be invested in mutual fund shares, but he would not owe any more commission fees to the fund. If Joe's investment grows by 10%, he would keep all of the \$1,045 if he sells his A shares after one year.

Now, let's say Joe decides to invest his \$1,000 in B shares with a 5% commission; he would not pay any commission upfront. But, if he decides to sell his B shares after a 10% gain, he would owe a commission of \$1,100 x 5% = \$55 when he sells his shares and he will pocket the remaining \$1,045.

If Joe buys \$1,000 of C shares, because they are level-load shares, the full \$1,000 goes toward buying shares. But regardless of the fund's performance, Joe pays an annual commission fee to the fund.

## Why it Matters:

A shares allow investors to pay commission upfront, and collect the entire amount the investment is worth when they are ready to sell. But, upfront commission fees mean that investors need to have a higher yield on their investment in order to get to positive territory.

Funds must disclose their fees to potential investors. Most advisors consider expense ratios of less than 1% to be reasonable.

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