Investing Assets & Markets What Is a Class of Shares? Classes of Shares Explained By TJ Porter TJ Porter Twitter TJ Porter has over seven years of experience writing about investing, stocks, ETFs, banking, credit, and more. He has been published on well-known personal finance sites like Bankrate, Credit Karma, MoneyCrashers, DollarSprout, and more. TJ has a bachelor's in business administration from Northeastern University. learn about our editorial policies Updated on December 29, 2021 Reviewed by Robert C. Kelly Reviewed by Robert C. Kelly Robert Kelly is managing director of XTS Energy LLC, and has more than three decades of experience as a business executive. He is a professor of economics and has raised more than $4.5 billion in investment capital. learn about our financial review board Fact checked by Jess Feldman Fact checked by Jess Feldman Website Jess Feldman has been writing and editing for over five years, and currently focuses on financial topics. As an associate editor on the special projects team, she writes, edits, and develops tentpole brand projects across a variety of platforms. Since joining the financial space, she's developed an interest in finding ways to make the complex topic of finance relatable to younger generations, specifically via TikTok. Jess has a journalism degree from the University of Maryland Philip Merrill College of Journalism. learn about our editorial policies Share Tweet Pin Email In This Article View All In This Article Definition and Examples of Classes of Shares How Classes of Shares Work Pros and Cons of Classes of Shares What It Means for Individual Investors Photo: pixelfit / Getty Images A class of shares is a designation that describes the different types of shares a company can issue. Different classes of shares in the same business may confer different amounts of ownership or voting rights in the business. This gives companies more flexibility when it comes to raising money by selling equity. When investing in a company, investors need to pay attention to the class of shares they’re buying. This article will cover how different classes of shares work and why they’re important. Note Classes of shares are typically designated by letters of the alphabet, such as A or B. Definition and Examples of Classes of Shares When companies want to raise money by selling an ownership stake in the business, they can do so by selling shares. Investors can purchase those shares and trade them with other investors on the open market. In many cases, companies sell just one class of shares. However, some companies choose to sell multiple different classes of shares. Each class has unique properties, such as representing a different amount of ownership or offering different voting rights. In some cases, only one class of shares is publicly traded, while another is privately held and has restrictions on sale. The two primary types of stock are common shares and preferred stock. Common shares represent the majority of shares that are available on the market, while preferred stocks typically come with more guaranteed dividends, have more stable prices, but do not have voting rights. Note There are also different share classes for mutual funds. The difference between each class is that the mutual fund will charge different fees to the owner depending on the class chosen. One real-world example of a company with multiple classes of shares is Alphabet, the parent company of Google. The company has two classes of shares, which are traded under the tickers GOOG and GOOGL. GOOGL shares are class A shares and give the owner one vote for each share owned. GOOG shares are Class C shares and offer no voting rights. There are also privately held Class B shares owned by the company’s founders and insiders. These offer 10 votes per share. Alphabet chose this particular stock structure in part to allow Google’s founders to retain full control over the company. The founders ended up with 51% of the voting power in Alphabet. Alternate name: classes of stock; share class How Classes of Shares Work When a company chooses to issue stock, it has the freedom to create multiple classes of stock and determine how many to issue. This way, the company can create the ownership structure it desires, such as giving certain shareholders more voting power. Note Companies can sell shares as part of an Initial Public Offering (IPO) or by issuing previously unissued shares. They may also create new classes of stock during a stock split. The rights granted by different classes of stock can create differences in their value, even if they represent the same ownership stake in a business. For example, at closing on May 26, 2021, GOOG—Alphabet’s Class C stock—was valued at $2,433.53, compared to GOOGL, the company’s Class A stock, which was worth $2,380.81. Mutual Fund Share Classes For mutual funds, as mentioned, the class of share typically reflects the fees the owner must pay. There are four classes of shares for mutual funds: A, B, C, and I, all explained in detail, below. Class A shares: Typically involve a front-end sales load (fees paid when buying shares) but charge lower ongoing fees. Some funds offer lower front-end loads with larger purchase amounts. Class B shares: Typically involve a back-end sales load (fees paid when selling shares). In most cases, the back-end load decreases as the investor holds shares for longer. This class also tends to charge lower ongoing fees than other classes of shares. Class C shares: Usually don’t charge sales loads but have higher ongoing fees than other classes of shares. Class I shares: Typically only available to institutional investors but tend to charge the lowest fees of all share classes. They also generally have high investment minimums. In some cases, these classes of shares are available to individuals through employer-sponsored retirement plans. Pros and Cons of Classes of Shares Pros Companies have more flexibility when raising money Investors can choose the mutual fund fee structure that works for them Cons Having multiple classes of shares adds complexity to investing Investors who choose the wrong class of shares may underperform Pros Explained Companies have more flexibility when raising money: Business owners who want to raise money by selling shares can retain more control over their company. They can do this by selling shares with less voting power than the shares they own.Investors can choose the mutual fund fee structure that works for them: Investors can choose the class of mutual fund shares with fees that work for their situation. For example, long-term investors can choose a class of shares with no front-end load and back-end loads that decrease over time. Cons Explained Having multiple classes of shares adds complexity to investing: If a single business or fund sells multiple classes of shares, investors need to pay attention to the class of share that they’re purchasing. In some cases, they may purchase a share they did not intend to.Investors who choose the wrong class of shares may underperform: Different classes of shares will perform differently. For mutual funds, fees can have a major impact on performance. So, in some cases, an investor who chooses the wrong class could pay more in fees, reducing returns. But it's important to note that divergence is more visible in mutual funds than in stocks. What It Means for Individual Investors The existence of different classes of shares means that individual investors need to pay attention to the things they’re investing in and make sure they’re buying the right class of shares. For example, if you’re buying shares in Alphabet Inc. because you want to have a voting stake in the business, you need to ensure that you purchase Class A shares that offer voting rights instead of Class C shares, which confer no voting rights. Similarly, if you’re buying shares in a mutual fund with multiple share classes, you have to make sure you buy the class of shares that has the best fee structure for your investing strategy and goals. That means taking the additional step to research different classes of shares and to check the fund’s prospectus for more information. Key Takeaways The class of a share is a designation describing the different types of shares a company can issue. These shares offer different amounts of ownership or voting rights in the business.Different classes of shares in a mutual fund will come with different fee structuresInvestors should be careful and conduct proper due diligence to make sure they purchase the correct class of shares for their investing goals. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Yahoo Finance. "Alphabet Inc. (GOOGL)." Yahoo Finance. "Alphabet Inc. (GOOG)." U.S. Securities and Exchange Commission. "Amended and Restated Certificate of Incorporation of Alphabet Inc." U.S. Securities and Exchange Commission. "Schedule 14A Alphabet Inc.," Page 61. Yahoo Finance. "Alphabet Inc. (GOOGL), Historical Data." Yahoo Finance. "Alphabet Inc. (GOOG), Historical Data." U.S. Securities and Exchange Commission. "Mutual Fund Classes." Alphabet Investor Relations. "Certificate of Incorporation."