Many fund abbreviations are followed by different letters, such as A, B, C, etc. However, there is no uniform standard for the specific meaning of these letters, and the meaning of the same letter may be different under different funds. Bian Xiao sorted out the differences between Class A and Class C funds here for your reference. I hope everyone will gain something in the reading process!
The most common way to classify shares is to divide them according to different charging methods. The common (but not absolute) definition is the Class A share with redemption fee and the Class C share with sales service fee.
The most traditional class a and the marginalized class B.
The earliest open-end funds, without exception, adopted the most traditional mode of collecting redemption fees.
Huaxia Bond Fund, established in June, 2002, should be the first one to charge by grades. The Fund has two classification methods: front-end charging mode (Class A) and back-end charging mode (Class B). Among them, the front-end charge means that the subscription fee is charged at the time of subscription, and the back-end charge means that the subscription fee is not charged at the time of subscription, which can be delayed until redemption. The longer the holding time, the lower the fee.
For an investor who intends to hold it for a long time, isn't it very happy that the subscription fee can be reduced or even cancelled for a long time? However, the sales organization is not happy. It was originally possible to charge a handling fee after selling a fund, but now this handling fee has to be delayed and may eventually disappear. That's not very painful. As a result, this B-type charging model is unpopular and gradually marginalized. In recent years, there is almost no such design for new products.
The Rise of Class C Charge Law
The earliest C-mode product is Southern Dolly Short-term Bond (now Southern Dolly Enhanced Bond) established in March 2006. The product creatively introduces the charging mode of "continuous sales fee", instead of charging the traditional subscription redemption fee, it charges a certain percentage of fees every day. But there was only Dolly in the south at that time, so there was no such thing as "Class C" at that time. Shortly after the establishment of South Dolly, Huaxia Bond launched its Class C share in April 2006. The "Class C" share was officially born.
Compared with the traditional A-type model, C-type model does not charge fees in the purchase and redemption stage, which reduces the short-term holding cost of investors. Because there is no clear charge, investors have a better experience and better flexibility. Class C mode, a "China characteristic", has been gradually recognized and popularized by investors since its birth.
For a long time at the beginning, the Class C model only existed in bond funds. It was not until 20 13 that the Class C share appeared in hybrid funds and equity funds, but the number of products with Class C share was not much and it did not become a "standard".
Nowadays, whether it is partial stock or partial debt, AC of two types of funds seems to have become standard.
Critical point of a or c
So if the fund you want to buy has both Class A shares and Class C shares, which one should you choose?
Simple conclusion: there is a critical point between short-term funds buying Class C and long-term funds buying Class A.
Class A will charge a one-time subscription fee, and Class C will continue to charge at an annualized rate, which will gradually increase with the holding time.
How to calculate the critical point?
Generally speaking, the short-term cost of class A is higher than that of class C, but at the critical point, the cost of both is the same.
1. If it is held for 30 days to 1 year, the subscription fee is 1.5%, corresponding to the redemption fee of 0.5%, totaling 2%, and the annual fee of 0.5% takes 4 years to reach Class C, so it is more cost-effective for Class C than Class A;
2. If you hold 1 to 2 years, the subscription fee is 1.5%, and the corresponding redemption fee is 0.2%, totaling 1.7%. It takes 3.4 years to reach Class C, and the annual fee is 0.5%, so Class C is more cost-effective than Class A;
3. If it has been held for more than 2 years, the subscription fee is 1.5%, corresponding to the redemption fee of 0, totaling 1.5%. It takes 3 years to reach Class C, and the annual fee is 0.5%, so it is cost-effective for C within 3 years and for A above 3 years.
However, friends should note that many third-party fund sales platforms can still see the minimum subscription fee of 10%. As shown in the above figure, the actual subscription fee is only 0. 15%, and the conclusion will be different:
1. If it is held for 30 days to 1 year, the subscription fee is 0. 15%, and the corresponding redemption fee is 0.5%, totaling 0.65%. Class C with an annual fee of 0.5% needs 1.3 years, which is more cost-effective than Class A;
2. If you hold 1 to 2 years, the subscription fee is 0. 15%, and the corresponding redemption fee is 0.2%, totaling 0.35%. It takes 0.7 years to reach Class C, and the annual fee is 0.5%, so within 0.7 years (that is, more than 8 months), Class C is more cost-effective, and beyond that, Class A is more cost-effective.
It can be seen that after the subscription fee is discounted, the critical point is shortened from 3 years to more than 8 months.
In the past two years, the returns of funds purchased by many investors are generally unsatisfactory. What caused the large losses of most funds? Mars, an analyst at Shanghai Securities Fund Evaluation Center, pointed out that, first of all, the essence of fund products is the combination of securities, and the performance of fund income is closely related to the performance of the underlying market. In the continuous decline of the stock market, it is difficult for equity funds and hybrid funds, which mainly invest in stocks, to achieve positive returns. In the case of rising stock market, most partial stock funds can often achieve positive returns. Therefore, it is impossible for funds to create myths and create high positive returns in the continuous decline of the market in recent years.
From the long-term performance, in most cases, the overall performance of funds is better than that of individual investors, especially in bull markets and volatile markets. For example, in 2006 and 2007, more than 80% of equity funds achieved a return of more than 100%, while the proportion of individual investors was less than 20 12 years. Nearly 50% of equity funds have achieved a return of 5% to 30%. According to the survey, more than 50% of individual investors have lost between 5% and 50%. Therefore, the fund is still a good investment tool for individual investors to participate in the capital market.
All kinds of problems, whether China's stock market construction, economic development or asset management industry, can't be eliminated in a short time, and all need the rationality of the market as a whole to promote it. However, as investors themselves, we must measure our risk tolerance clearly and not blindly listen to the propaganda of sales staff. If your risk tolerance is weak, or the funds you want to use in the short term, you can't invest too much in a single stock fund to avoid being greatly affected by the risk of stock market fluctuations. Therefore, for individual investors, it is more meaningful to have a long-term investment mentality, choose appropriate fund products according to their own risk tolerance and renewal, avoid excessive pursuit of popular funds with outstanding short-term returns, pay more attention to funds with relatively stable long-term performance, and spread risks through fixed investment and portfolio allocation to obtain long-term stable returns.
In other words, when people buy funds, do they prefer to buy Class A or Class C?
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