When referring to investments, "D stock" commonly denotes Class D shares of a mutual fund. These shares are characterized by a specific fee structure that combines different types of sales charges, resulting in what is known as a blended sales charge.
Understanding Class D Shares in Mutual Funds
Class D shares are a particular category of shares offered by mutual funds, designed with a distinct fee arrangement. Unlike some other share classes that might charge a single upfront sales load, Class D shares levy their fees in a different manner:
- Level Load: Investors in Class D shares pay a "level load" each year. This is an ongoing annual fee, typically a percentage of the assets under management, that is charged consistently as long as the investor holds the shares.
- Back-End Load (Redemption Charge): In addition to the annual level load, Class D shares also include a "back-end load," also known as a redemption charge. This is a sales charge that investors pay when they sell or redeem their shares. The amount of this charge can sometimes decrease over time, depending on how long the shares have been held, although the primary characteristic is that it's assessed at the time of sale.
Effectively, an investor who purchases Class D shares will encounter a "blended sales charge" because they are paying a combination of an annual fee and a fee upon selling their investment. This structure aims to distribute the sales charge over the life of the investment and at its conclusion.
Key Characteristics of Class D Shares
Here are the essential aspects that define Class D shares:
- Fee Structure: They implement a dual fee system comprising an annual level load and a redemption charge at the time of sale.
- Sales Charge Type: The combination of these charges creates a "blended sales charge," meaning the investor doesn't pay a single large upfront fee but rather ongoing and exit fees.
- Suitability Considerations: The specific fee structure of Class D shares means investors should carefully consider their investment horizon and financial goals. The ongoing level load and the redemption charge upon selling are important factors in determining the overall cost of the investment.
Understanding these fee structures is crucial for investors when comparing different mutual fund share classes and making informed decisions about which type of share best aligns with their investment strategy.
