# Understanding Share Classes: Types, Rights, and Key Features Explained

![A closeup view of a statement shows the varying performance of class A, B, and C shares of a mutual fund.](https://www.investopedia.com/thmb/AhNfYmgtF1AZgKxwSa4ZiulvIb0=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/ShareClassDefinitionHowRightsWorkFeaturesandExampleGettyImages-1371617367-568fe41b04f04caba76f266e3517e988.jpg)

*— Ca-ssis / Getty Images*

> **Definition**
>
> A share class is a security designation, such as Class A or Class B, that indicates the rights, privileges, fees, and expenses associated with the shares.

## What Is a Share Class?

A share class is a way for companies or mutual funds to organize their stock or shares. Share classes are important because they come with different rights, costs, and benefits. Some classes have more voting power, while others might have lower fees. Common types include Class A and Class B shares, and mutual funds also have different share classes with varying costs and features. Understanding these differences helps investors make better decisions about how to invest their money

### Key Takeaways

*   Different share classes in a company often carry distinct privileges, such as voting rights.  
    
*   Mutual fund share classes invest in the same portfolio but differ in fees and expenses.  
    
*   Class A mutual fund shares have upfront sales charges, while Class B shares incur back-end loads.  
    
*   Institutional share classes offer the lowest fees and expenses but require high net worth or institutional investment.  
    
*   Google's dual share class includes A shares with voting rights and C shares without them.

## Understanding Different Company Share Classes

Different share classes within the same entity typically confer different rights to the stockholder. For example, a [public company](https://www.investopedia.com/terms/p/publiccompany.asp) may offer two classes of common stock outstanding: Class A common stock and Class B common stock. This dual-class structure is typically decided on when a company first goes public and issues stock in the [primary market](https://www.investopedia.com/terms/p/primarymarket.asp).

For instance, a [private company](https://www.investopedia.com/terms/p/privatecompany.asp) going public through an [IPO](https://www.investopedia.com/terms/i/ipo.asp) might issue [Class A shares](https://www.investopedia.com/terms/c/classashares.asp) to new investors and [Class B shares](https://www.investopedia.com/terms/c/classbshares.asp) to existing stakeholders. This dual-class structure allows original owners to sell most of their stake while maintaining control and decision-making. In this case, the class B shares would typically have enhanced [voting rights](https://www.investopedia.com/terms/v/votingright.asp).

[Google instituted a dual share class](https://www.investopedia.com/ask/answers/052615/whats-difference-between-googles-goog-and-googl-stock-tickers.asp) structure during its corporate transformation into Alphabet Inc. in 2015. The company issued A-class shares (ticker GOOGL) and C-class shares (ticker GOOG), which are similarly priced, but C-class [lack voting rights](https://www.investopedia.com/ask/answers/061515/how-are-mutual-funds-c-shares-different-and-b-shares.asp). The company also issued a B class share, reserved for management and other controlling parties.

## Exploring Mutual Fund Share Classes

Mutual funds often offer several share classes to investors. Every share class invests in the same securities portfolio and follows identical investment objectives and policies. However, their fees and expenses differ, which impact their performance. Other parameters, such as initial investment amounts, may differ as well.

The most common share class, A shares, includes a front-end load paid upfront at purchase. These funds may seem costly in the beginning but may be less expensive if held over the long-term. Upfront sales charges typically range from 2% to 5.75%, based on fund type and purchase volume.

The B-share class is the opposite of the A share: It carries a back-end load, a commission paid when the investor sells it. This fee decreases over time as you hold the mutual fund, eventually reaching zero. B shares can often be converted into A shares after about seven years.

The C-share class charges an annual fee for the life of the fund of around 1%, called a level-load. However, C-shares do often have a contingent deferred sales charge that may be triggered if they are sold within one year.

B and C shares often have higher expense ratios, meaning higher annual management and maintenance fees, compared to A shares.

## Institutional Share Classes: Features and Benefits

There are several other mutual fund share classes, with designations like I, R, N, X, and Y. These are what are known as institutional shares. Mutual funds usually make these classes available only to those with high net worth, typically more than $1 million, or to institutional investors who can make seven-figure deposits. However, 401(k) plans and other employer-sponsored retirement plans count as such institutional investors; by pooling the employees' contributions, the plan administrator is able to qualify for this class of shares. This is highly desirable: Institutional shares usually carry the lowest fees and expenses of mutual fund share classes. Because of the low expense ratios, institutional class shares invariably garner the best returns.

For example, investment company [Vanguard](https://www.investopedia.com/vanguard-review-4587932) offers three share classes. Investor shares demand $1,000 to $3,000 initial deposits and carry an average expense ratio of .18%. Admiral shares have $3,000, $50,000 or $100,000 minimums, but the expense ratio averages .11%. Finally, the Institutional shares begin at $5 million, and their average expense ratio is .05%.

## The Bottom Line

Share classes are different stock or mutual fund share categories that come with varying rights, costs, and benefits. For instance, Class A and Class B shares can differ in voting power, fees, and privileges. Some companies, like Google (now Alphabet), use multiple share classes to keep control while raising money. Mutual funds also have different share classes, and the expenses of each class can affect how much money investors earn over time. Institutional share classes are designed for big investors and can offer lower costs and better return opportunities.