Investing Assets & Markets Mutual Funds What Are Mutual Fund Class R Shares? By Kent Thune Updated on January 2, 2022 Reviewed by Thomas J. Brock Reviewed by Thomas J. Brock Thomas J. Brock is a CFA and CPA with more than 20 years of experience in various areas including investing, insurance portfolio management, finance and accounting, personal investment and financial planning advice, and development of educational materials about life insurance and annuities. learn about our financial review board Fact checked by Kyra Baker In This Article View All In This Article Definition and Example of Mutual Fund Class R Shares How R Share Mutual Funds Work What It Means for Individual Investors Photo: Getty Images Definition Mutual fund class R shares are designated as a retirement share class. If you own mutual funds in a 401(k) plan, or if you've done research trying to find a no-load version of your favorite fund, you may have seen Class R share mutual funds. Key Takeaways Class R mutual funds are only available through job-sponsored retirement plans as designated through the letter "R."Mutual fund class R shares do not charge loads, which are fees charged to the investor for some mutual funds.The lower the expense ratio, the less money you'll lose to fees.R share mutual funds can have higher expense ratios (percentage of fees) that index funds, so try to look for R share funds that have average or below-average expense ratios.If you'll be investing for at least 10 years, look at index funds before choosing an R fund. Definition and Example of Mutual Fund Class R Shares While Class A, Class B, and Class C are common types of mutual fund share classes, Class R shares are mutual funds designated as a retirement share class—hence the letter "R." The R share class mutual funds are only available through an employer-sponsored retirement plan, such as a 401(k). R share mutual funds do not have a load, such as a front-end load, back-end load, or level load. However, they do have 12b-1 fees that typically range from 0.25% to 0.50%. One example of a common R share fund family seen in 401(k) plans is American Funds. You may have seen the American Funds Growth Fund of America, American Funds Fundamental Investors, or American Funds SMALLCAP World in either R1, R2, R3, or R4 share classes. Alternate name: R share mutual funds How R Share Mutual Funds Work R share mutual funds are available through 401(k) plans, because mutual funds that charge loads are not allowed in employer-sponsored retirement plans. Mutual fund companies that offer funds that charge loads—which are mostly sold through commission-based brokers—came up with the R share class to get around that problem. Although R shares can have reasonable expense ratios and can be better than using load funds, like A shares, B shares, or C shares, they still tend to be higher than those of index funds. For example, the American Funds Growth Fund of America R1 (RGAAX) has an expense ratio of 1.40%, which is slightly above average for actively managed growth funds. However, compare that to the Vanguard Growth Index Fund Admiral Shares (VIGAX), which has an expense ratio of 0.05%, and you have a difference of 1.39% in favor of VIGAX. Note Over time, the larger expense ratio of the R share fund will be a big drag on performance. In the long run, that could translate into thousands of dollars less in total gain. What It Means for Individual Investors It's wise to take advantage of any matching contributions your employer may make when you contribute to your own 401(k). However, be sure to pay attention to the expenses, especially if there is no employer match. You may choose to open your own retirement account, such as an individual retirement account (IRA), at one of the best no-load mutual fund companies. If you want to take advantage of your employer's 401(k) plan, and R share funds are the only choice, you can still use them and find the best available examples that suit your objectives and risk tolerance. Given the choice between R shares and a low-cost index fund, most investors are wise to choose the index fund, especially if investing for a period of 10 years or more. 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. Investor.gov. "Updated Investor Bulletin: Mutual Fund Classes." Accessed Nov. 20, 2021. Morningstar. "Descriptions of Share Class Types." Accessed Nov. 20, 2021. Capital Group. "SMALLCAP World Fund." Accessed Nov. 20, 2021.