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FYI: Mutual funds have become a staple of the modern investor. If you have a 401(k) or employer-sponsored retirement account, you’ll want to learn more about the R-class shares of mutual funds. Regards, Ted http://mutualfunds.com/education/learn-about-class-r-shares/
Is there anything in this short article that is correct?
Put simply, the R-class of mutual funds are available only through employment-based retirement accounts ... In other words, investors access R-class mutual funds through their employers or work arrangement. ,,, To qualify for Class R shares, you must have access to a 401(k), 457 or employer-sponsored 403(b) plan.
mutual funds that charge loads are not allowed in employer-sponsored retirement plans
"Apart from fees charged for administration of the plan itself, there are three basic types of fees that may be charged in connection with investment options in a 401(k) plan. ... Sales charges (also known as loads or commissions)." From DOL (2013). Emphasis in original.
R-class shares were designed to allow securities firms to serve retirement planners without charging a load
Ironically, the fund cited in the piece, RGAAX, is the R-1 share class of an American Funds fund. AF R-1 shares are load shares. They charge 12b-1 fees of 1.00%. As a matter of law, any fund charging a 12b-1 fee in excess of 0.25% must be called a load fund. (The article also gets the ticker wrong; it gives a MMF ticker ending in XX.)
R shares still have fairly low expense ratios but tend to be costlier than index funds.
R shares can be index funds just as easily as they can be actively managed funds. Often, that makes them cheaper than sibling share classes of the same fund. For example, OGFAX (JP Morgan Equity Index R6) is the cheapest share class of this fund; at 0.04%, it costs just 1/5 as much as the institutional share class HLEIX.
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https://www.oldnational.com/thehsaauthority/individuals-employees/investment-services
"Apart from fees charged for administration of the plan itself, there are three basic types of fees that may be charged in connection with investment options in a 401(k) plan. ...
Sales charges (also known as loads or commissions)."
From DOL (2013). Emphasis in original.
Ironically, the fund cited in the piece, RGAAX, is the R-1 share class of an American Funds fund. AF R-1 shares are load shares. They charge 12b-1 fees of 1.00%. As a matter of law, any fund charging a 12b-1 fee in excess of 0.25% must be called a load fund. (The article also gets the ticker wrong; it gives a MMF ticker ending in XX.)
R shares can be index funds just as easily as they can be actively managed funds. Often, that makes them cheaper than sibling share classes of the same fund. For example, OGFAX (JP Morgan Equity Index R6) is the cheapest share class of this fund; at 0.04%, it costs just 1/5 as much as the institutional share class HLEIX.