401k fund selection - Share class

[Guest dsw713]

I'm looking for a good explanation of why I would pick an R6 share, over a R1, R2, R3, etc. I know there is a difference in the expense ratio and operating expense. Is there anything else?

[GMK]

I'd like to see an expert's answer, too.

I've seen that different classes may be load or no-load and may have different minimum required investment amounts.

As you note, expense ratios can vary significantly between classes, especially 12b-1 fees.

[Bird]

R-6, at least for the American Funds group, is the lowest-cost share class available. It has absolutely no advisor compensation (commissions) built into it. It might mean that plan costs are very low...and it might not. This class could be used by a plan that has a Registered Investment Advisor who is being compensated on a percentage of assets in the plan, or on some other fee basis, and those costs could be paid by the plan or by the employer. And the TPA is getting absolutely nothing on this share class either. So to evaluate whether it is "good" or "bad" you have to be able to ID all of the costs and fees, and also determine who is paying them. It could be that it's a low-cost plan to the participants, if the employer is picking up some costs directly, or it could be that the plan is paying costs, just not through the fund expense ratios.

But to answer your question, the only difference between R-1,2,3,4,5 and 6 is the expenses (and for that matter, A,B,C, 529, etc.). The money is all in a big pot.