A mutual fund cost typically consists of sales charges and annual expenses. The sales charge is the broker's commission which is directly deducted from the money invested when the investor buys or sells his funds. The annual expenses is the fees charged to cover the administrative expenses and the fund's operating costs, and is usually deducted from the fund before computing the fund's returns.

It is important to understand the differences between share classes and carefully selecting the appropriate mutual fund share class for you when you decide to invest. Although the different classes of shares represent investments in the same group of securities, they differ in the sales charges and expenses charged and will possibly have different net asset values. Different share classes also have different limits set for the minimum amount of money that can be invested and offer different levels of services. In which share class an investor must invest depends on how much he wants to invest and the length of the period for which he wants to make the investment.

Class A shares charge investors a front-end load, usually 4 to 5 percent and are appropriate for long term investment of a large number of shares. Class B shares charge no up-front commission, but charge a redemption fee of 3 to 5 percent if the shares are redeemed within a period of 5 years and are appropriate for long-term investment of a small number of shares. Class C shares charge no up-front or back-end load, and no redemption fee if the shares are held for one or two years and are appropriate for short-term (less than 5 years) investment of a large number of shares. The 12b-1 fee is very high for Class B and Class C shares than for Class A shares. Certain types of mutual funds may not offer share classes while others may offer even hybrid load shares or mid-load shares.