The purpose of loads is to compensate an investment advisor for providing investment advice. Therefore, the only time paying a load can make sense is if you are using an investment advisor. If you are a do-it-yourself investor, you should always try to avoid paying a load. Most funds that are A-share, B-share, or C-share class are sold through a broker. Some mutual fund companies created the D-share class of funds to accommodate the demand for no-load versions of the more popular funds. One of the most widely held D share mutual funds is PIMCO Real Return D. Compared to PIMCO Real Return A, PIMCO Real Return B, and PIMCO Real Return C, the D-share class is the only one with no load, and it has the lowest net expense ratio. You’ll find similar options through other major investment management firms.
How Mutual Fund Class D Shares Work
Class D shares are not as widely available as other classes and are often designed for the DIY investor purchasing shares online. Because there is usually no load, they are less profitable for brokers than other shares, so brokers won’t sell them directly. In most cases, no-load funds have lower average expense ratios than load funds. Lower expenses generally translate into higher returns, because any expenses to manage the mutual fund portfolio come directly out of the gross returns of the fund. Mutual fund purists might not recognize a D-share fund as a true no-load fund, which does not have any share class letter or descriptor at the end of the fund name, but D shares normally do not charge any load. Sometimes, they may charge a level load fee (for example, 1% per year), but that is not typical. The type of mutual fund share that works best for you depends on your own investing goals and the size of your portfolio. If you do plan on doing some DIY investing, it’s worth looking into Class D shares as an option.
