Class C Mutual Fund Shares: Level Load Suitability
An investor plans to invest $15,000 in a mutual fund with a target holding period of 18 months. Which share class is typically MOST cost-effective for this short time horizon?
Class C shares (level load) charge no front-end load and typically only have a 1% CDSC if redeemed within the first year. For a 12 to 18-month holding period, paying a ~1% level fee is cheaper than paying a 5% front-end load on Class A shares.
Complete Analysis & Legal Rationale
Over long holding periods (5+ years), Class C shares become expensive due to higher annual 12b-1 fees (up to 0.75%-1.00%) that never convert to Class A.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
Class C level load is most cost-effective for short holding periods (<2 years).
$15,000 does not qualify for significant Class A breakpoints; 5% front load is punitive for 18 months.
Class B CDSC is highest in years 1-2 (5%-6%), resulting in severe redemption penalties.
Irrelevant asset class.