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Mutual Fund Share Classes: Understanding the ABCs

Mutual Fund Share Classes: Understanding the ABCs

 

Choosing a mutual fund to invest in is only half the battle; many mutual funds contain multiple share classes, each with their own fee structure and load charges. This alphabet soup of share classes can seem inexplicable, but once you understand each share class’s details, you’ll be well on your way to choosing the fund share class that best fits your financial goals.

This quick 2-page guide from Morningstar has all the information you need to make an educated decision about what fund share classes are right for you. Here are two important takeaways from the piece:

 

1. Institutional (Inst) shares generally have the lowest expense ratios of all share classes, but these shares typically carry investment minimums of $25,000 or more. However, HealthSavings is able to offer these funds for all levels of investors, so account holders can take advantage of these fund shares’ unmatched cost savings from their first dollars.

By investing with HealthSavings, account holders gain full access to 42 institutional share class funds from Vanguard® and Dimensional and bypass the usual investment minimums for these funds. For account holders looking to grow their health savings account funds long-term to cover future medical expenses, there’s no better place to invest. Learn more about our comprehensive, streamlined Investor Focus HSA fund lineup here.

 

2. Virtually all fund share classes charge expense ratios, but some expense ratios have additional 12b-1 fees included to cover funds’ distribution and marketing costs. These built-in 12b-1 fees raise funds’ total expense ratios, which means a higher percentage of assets are removed from your funds as payment.

For investors, 12b-1 fees can be a hidden cost that silently eats away at returns. At HealthSavings, none of the 42 funds in our carefully curated lineup have 12b-1 fees, so more of your assets stay growing for you.

Author: Craig Keohan