Class C shares
Also known as: c shares, level-load shares
Class C shares are a mutual fund share class with no front-end sales charge but a higher ongoing 12b-1 fee, often called a level load. They typically suit investors with shorter time horizons.
Class C shares are one of the main share classes a mutual fund offers, differing from Class A and Class B shares only in how the investor pays sales charges — the underlying portfolio is identical. Instead of a front-end load deducted at purchase (Class A) or a declining back-end load (Class B), Class C shares charge a level load: an elevated annual 12b-1 fee, commonly around 1% of assets, deducted from the fund every year.
Most Class C shares also carry a contingent deferred sales charge (CDSC) of about 1% if the investor sells within the first year, after which redemptions are free of transaction charges. Because there is no large upfront deduction, nearly all of the investor's money goes to work immediately.
The catch is that the elevated 12b-1 fee never declines the way a Class B CDSC does, and traditionally C shares did not convert to cheaper A shares (many fund families now convert them after a set number of years). Held for a long time, the annual drag of a level load can cost more than a one-time front-end load would have. That is why Class C shares are generally considered suitable for shorter holding periods, while Class A shares — especially with breakpoint discounts for large purchases — favor long-term investors.
Mutual fund share classes are a staple of the SIE, Series 6, Series 7, Series 65, and Series 66 exams. Know the fee structure of each class and the classic suitability pairing: A shares for large or long-term investments, C shares for smaller, shorter-term ones.
Key takeaways
- Class C shares charge no front-end load but carry a higher annual 12b-1 fee — a level load.
- A roughly 1% CDSC usually applies to redemptions within the first year.
- Because the elevated annual fee persists, C shares tend to cost more than A shares over long holding periods.
- Exams test share class suitability: C shares fit shorter time horizons; A shares with breakpoints fit larger, long-term investments.