Share Class Fees

According to The Wall Street Journal, as recently as 1989, the total number of share classes matched the 2,262 mutual funds in the U.S. (excluding money market funds). By 2010, there were 6,928 U.S. funds available in 20,188 share classes (meaning each fund offered ~ 3 different share classes). A 1% difference in annual fees can have a significant impact over time. For example, a 25-year old who saves 9% of his pay each year in a typical balanced fund will end up with $510,000 by age 65 ($410,000 if the annual fee is 1.25% instead of 0.25%).

 

Finra offers a side-by-side comparison tool at Finra.org/fundanalyzer. For example, it shows that $25,000 invested in the Invesco S&P 500 Index Fund will cost $1,270 with A shares and $1,630 with C shares. A similar investment in the Fidelity Spartan 500 Index Fund costs just $115 over the same 10-year period (all examples assume a 5% annualized growth rate).