Products & Their RisksQuestion 63 of 398
An investor plans to make a large lump-sum investment and hold it for 20 years. Which mutual fund share class is generally most cost-effective for this investor?
a.Class C shares, because of the level 12b-1 fee
b.Class A shares, because of front-end breakpoint discounts and lower ongoing fees
c.Class B shares, because the sales charge disappears immediately
d.Any class, because total costs are identical over time
Explanation
Class A shares charge a front-end sales load but offer breakpoint discounts on large purchases and typically carry the lowest ongoing 12b-1 fees. For a large, long-term investment, the reduced annual expenses usually outweigh the up-front charge, making Class A the most economical choice.
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