What Does Your Mutual Fund Reclassification Mean to You?

Reclassification is a process that will often happen to mutual fund shares. If you are an investor in a mutual fund that has been reclassified, it can impact you significantly. Here are the basics of mutual fund reclassification and what it means to you.

Reclassification

Mutual funds will regularly issue different classes of shares that are very similar. For example, you might see a mutual fund that has Class A and Class B shares available. The basic structure of the fund is similar, but the big difference is in the way that fees are charged. Whenever a reclassification takes place, this means that one of the classes of mutual fund shares is being converted into another class.

Impact

As an investor, this could potentially mean that you do not have to pay a sales charge to the mutual fund company. For example, let's say that you decided to purchase shares into a back-end fund. This means that you would not have any sales charge on the front end of your purchase. Then, the company decides to reclassify that set of shares into a no-load mutual fund. If this happens, you will no longer have to come up with any money whenever you sell your shares.

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