What distinguishes Class A shares from Class B shares in a mutual fund?

The distinction between Class A shares and Class B shares in a mutual fund primarily revolves around their fee structures. Class A shares typically carry a front-end sales charge, which is a fee that is paid at the time of purchase. This means that investors who buy Class A shares will pay a percentage of their investment upfront as a sales commission. This structure can be advantageous for long-term investors since the ongoing fees are usually lower compared to Class B shares.

On the other hand, Class B shares do not have a front-end sales charge but instead include a contingent deferred sales charge (CDSC). This charge applies if the investor redeems their shares within a certain period, usually several years. Therefore, Class B shares are designed such that the investor won't pay anything upfront, but they could incur costs later if they sell their shares before the period specified in the terms.

This fee structure is designed to serve different types of investors: those who plan to hold their investment for a longer time might prefer Class B shares to avoid upfront charges, while those who are making a long-term commitment might opt for Class A shares since they often have lower management fees afterward. The characteristics outlined in the answer highlight the key financial implications of each class.