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funds in the United States and Canada. For other fo rms of mutual investment, see Collective investment scheme. A mutual fund is a professionally managed type of collective investment scheme t hat pools money from many investors and invests typically in investment securiti es (stocks, bonds, short-term money market instruments, other mutual funds, othe r securities, and/or commodities such as precious metals).[1] The mutual fund wi ll have a fund manager that trades (buys and sells) the fund's investments in ac cordance with the fund's investment objective. In the U.S., a fund registered wi th the Securities and Exchange Commission (SEC) under both SEC and Internal Reve nue Service (IRS) rules must distribute nearly all of its net income and net rea lized gains from the sale of securities (if any) to its investors at least annua lly. Most funds are overseen by a board of directors or trustees (if the U.S. fu nd is organized as a trust as they commonly are) which is charged with ensuring the fund is managed appropriately by its investment adviser and other service or ganizations and vendors, all in the best interests of the fund's investors. Since 1940 in the U.S., with the passage of the Investment Company Act of 1940 ( the '40 Act) and the Investment Advisers Act of 1940, there have been three basi c types of registered investment companies: open-end funds (or mutual funds), un it investment trusts (UITs); and closed-end funds. Other types of funds that hav e gained in popularity are exchange-traded funds (ETFs) and hedge funds, discuss ed below. Similar types of funds also operate in Canada, however, in the rest of the world, mutual fund is used as a generic term for various types of collectiv e investment vehicles, such as unit trusts, open-ended investment companies (OEI Cs), unitized insurance funds, undertakings for collective investments in transf erable securities (UCITS, pronounced "YOU-sits") and SICAVs (pronounced "SEE-cav s"). Contents [hide] * * * * * * History Usage, investment objectives Net asset value Average annual return Turnover Expenses and expense ratios o 6.1 Management fees o 6.2 Non-management expenses o 6.3 12b-1/Non-12b-1 service fees o 6.4 Investor fees and expenses o 6.5 Brokerage commissions * 7 Types of mutual funds o 7.1 Open-end fund, forms of organization, other funds o 7.2 Exchange-traded funds o 7.3 Equity funds + 7.3.1 Market Cap(italization) + 7.3.2 Growth vs. value + 7.3.3 Index funds versus active management o 7.4 Bond funds o 7.5 Money market funds o 7.6 Funds of funds o 7.7 Hedge funds * 8 Mutual funds vs. other investments o 8.1 Share classes 1 2 3 4 5 6

t he worldwide value of all mutual funds totaled more than $26 trillion.the fund will s eek capital appreciation by investing primarily in listed equity securities (sto cks) of U.S.000 in assets ..[4] [edit] Usage. after one year. First Index Investment Trust." This would be "sto ck" fund or a "domestic/US stock" fund since it stated U. high-yield junk bond s or investment-grade corporate bonds). such as technology. it had 200 shareholders and $392. with mo re than $100 billion in assets.. was formed in 197 6 and headed by John Bogle. which included a few closed-end funds. Securities and Exchange Commission (SEC) and provide prospective inves tors with a prospectus that contains required disclosures about the fund. A fund ma y invest primarily in the shares of a particular industry or market sector. For example. and fund manager. investment objectives Since the Investment Company Act of 1940. These laws require that a fund be registered with the U. up to $2. government agenci . there are 8. other mutual fund shares and more exotic instrument s such as derivatives like forwards. Even peo ple already enrolled in corporate pension plans could contribute a limited amoun t (at the time.015 mutual funds that belong to the Investment C ompany Institute (ICI). the se curities themselves. which is the legal document unde r SEC laws which offers the funds for sale and contains a wealth of information about the fund). As of October 2007.. Mutual funds are now popular in employer-s ponsored "defined-contribution" retirement plans such as (401(k)s) and 403(b)s a s well as IRAs including Roth IRAs. and.. A key factor in mutual-fund growth was the 1975 change in the Internal Revenue C ode allowing individuals to open individual retirement accounts (IRAs). represented less t han $10 million in 1924. bonds. type of issuers (e. Bond funds can vary according to risk (e. These are known as specialty or sector funds. the fund's objective might state ".2 Load and expenses 9 See also 10 References 11 Further reading 12 External links [edit] History Massachusetts Investors Trust (now MFS Investment Management) was founded on Mar ch 21. Some funds' inv estment objectives (and or its name) define the type of investments in which the fund invests. 1924. The most common securities purchased are "cash" or money market instruments. utilities or financial services.356 trillion. The first retail index fund. a mutual fund is one of three basic ty pes of investment companies available in the United States. The Investment Company Act of 1940 sets f orth the guidelines with which all SEC-registered funds must comply. a national trade association of investment companies in the United States.* * * * o 8.[3] In early 2008. futures.[2] It is now called the Vanguard 500 Index Fund and is one of the world's largest mutual funds. options and swaps.S. Congress passed the Securities Act of 1933 and the Se curities Exchange Act of 1934. companies with any market capitalization range.g.S.000 a year). there were approximately 270 funds with $48 billion in asse ts. mutual funds began to blossom. In response to the stock market crash. With renewed confidence in the stock market.g. The stock market crash of 1929 hindered the growth of mutual funds. stocks. companies. who conceptualized many of the key tenets of the ind ustry in his 1951 senior thesis at Princeton University. with combined assets of $12. The entire industry. By t he end of the 1960s.[5] Mutual funds may invest in many kinds of securities (subject to its investment o bjective as set forth in the fund's prospectus.

is the current market value of a fund's holdings. In the U. the type of income they earn is often unchanged as it passes through to the shareholders. [edit] Net asset value Main article: Net asset value The net asset value. Closed-end funds (the shares o f which are traded by investors) may trade at a higher or lower price than their NAV. or POP. and so process orders only after the NAV is determined. Most mutual funds' investment portfolios are continually monitored by one or mor e employees within the sponsoring investment adviser or management company. the fund would invest in securities and likely specific derivates such as S&P 500 stock index futures in order to most closely match the performance of that index. Mutual funds are subject to a special set of regulatory.or long-t erm). Thus. Taxable distributions can be either ordinary inc ome or capital gains. or NAV. Some fund names are not associated wi th specific securities so the name rule has less relevance in those situations. and tax rul es. both U. Some mutual funds own securities which are not regularly traded on any formal ex change. or maturity of the bonds (short. at least 80% of its assets in tax-exempt bonds issued by the state of New Jersey and its political subdivisions.S. Open-end funds sell shares at the POP and redeem shares at the NAV. an index fund strives to match the pe rformance of a particular market index. or municipalities). under normal circu mstances. Lastly. Also. m inus the fund's liabilities. Fo r most funds. securities (domesti c funds). accounting. that is usually expressed as a per-share amount. Mutual fund distributions of tax-free municipal bond income a re tax-free to the shareholder. commonly called the "na me rule". they are not taxe d on their income as long as they distribute 90% of it to their shareholders and the funds meet certain diversification requirements in the Internal Revenue Cod e. unlike most other types of business entities.es. the SE C issued a rule under the '40 Act which aims to better align fund names with the primary types of investments in which the fund invests. The public offering price. These may be shares in very small or bankrupt companies. For example. . such as the S&P 500 Index. who invest the funds asse ts in accordance with its investment objective and trade securities in relation to any net inflows or outflows of investor capital (if applicable). they may be der ivatives. or they may be private investments in unregistered financial instrumen ts (such as stock in a non-public company). as well as t he ongoing performance of investments appropriate for the fund. In such a fun d. the NAV is determined daily. A mutual fund is advised by the investment adviser under an advisory contract which generally is subject to renewal annually. under this rule. the "ABC N ew Jersey Tax Free Bond Fund" would generally have to invest. and foreign securities (global funds). is the NAV plus a sales ch arge. this is known as a premium or discount. the "ABC Freedom Fund" is such that its name does not imply a speci fic investment style or objective.S. If a fund is divided into multiple classes of shares. it is the responsibility of the fund manager to form an esti mate of their value when computing the NAV. typi cally called a portfolio manager and their assistants. after the close of trading on some sp ecified financial exchange. for example. Net losses are not distributed or passed through to fund investors. Both stock and bond funds can invest in primarily U. corporations. In the absence of a public market fo r these securities. or primarily foreign securities (international funds). Since fund names in the past may not have prov ided a prospective investor a good indication of the type of fund it was. depending on how the fund earned those distributions.. a fund must invest under normal circumstances i n at least 80% of the securities referenced in its name. How much of a fund's assets may be i nvested in such securities is stated in the fund's prospectus. respectively.S. but some funds update their NAV multiple times durin g the trading day. each class will typically have its own NAV. re flecting differences in fees and expenses paid by the different classes.

e. or NAV (net asset value). 5-year and 10-year periods as the "average annual total re turn" for each fund. 5-. The fee structure of a mu tual fund can be divided into two or three main components: management fee. the fund counts one security sold and another one bought as one "turnover". [edit] Turnover Turnover is a measure of the fund's securities transactions. the advisory fee paid decreases. Contractual advisory fees may be structured as "flat-rate" fees. as many fund companies include administrative fees in the advisory fee component . and usually expressed as a percentage of net asset value. This "levels the playing field" when comp aring management fee components across multiple funds.The price per share. regardless of the asset size of the fund. In Canada. usually calculated over a year's time.. T = average annual total return.000. i. selli ng) divided by 2 divided by the fund's total holdings. ERV = ending redeemable value of a hypothetical $1. This value is usually calculated as the value of all transactions (buying. [edit] Management fees The management fee for the fund is usually synonymous with the contractual inves tment advisory fee charged for the management of a fund's investments. 5-. a single fee charged to the fund. However.e.000 payment made at the begin ning of the 1-. [edit] Average annual return US mutual funds use SEC form N-1A to report the average annual compounded rates of return for 1-year. and 12b-1/non-12b-1 fees. many funds have contractual fees which include breakpoints so that as the value of a fund's assets increases. nonmanagement expense. The following formula is used:[6] P(1+T)n = ERV Where: P = a hypothetical initial payment of $1. i. [edit] Non-management expenses . is calculated by dividing the fun d's assets minus liabilities by the number of shares outstanding. This is usuall y calculated at the end of every trading day... Thus turnover measures the replacement of holdings. [edit] Expenses and expense ratios Mutual funds bear expenses similar to other companies. i t is helpful to define management fee as equal to the contractual advisory fee p lus the contractual administrator fee. under NI 81-106 (required disclosure for investment funds) turnover r atio is calculated based on the lesser of purchases or sales divided by the aver age size of the portfolio (including cash). or 10-year peri ods (or fractional portion). when attempting to compare the total management expenses of different funds. n = number of years. All expenses are expressed as a pe rcentage of the average daily net assets of the fund. However. or 10-year periods at the end of the 1-. Another way in which the advisory fees remain competitive is by structuring the fee so that it is bas ed on the value of all of the assets of a group or a complex of funds rather tha n those of a single fund.

Some of the more significant (in terms of amount) non-manage ment expenses are: transfer agent expenses (this is usually the person you get o n the other end of the phone line when you want to buy/sell shares of a fund). No n-12b-1 service fees are marketing/shareholder servicing fees which do not fall under SEC rule 12b-1. the 1 2b-1 fees for the fund are usually . [edit] Investor fees and expenses Fees and expenses borne by the investor vary based on the arrangement made with the investor's broker. It is expected that a fund listed on an online brokera ge site will be paying for the "shelf-space" in a different manner even if not d irectly through a 12b-1 fee. The amount of commissions incurred by the fund and are reported usually 4 months after the fund's fiscal year end in the "statement of additional information" which is legally part of the prospe ctus. For example. While funds do not have to charge the full contractual 12b -1 fee. which may force the fund to make bad trades to obtain the necessary l iquidity. usually charged when securities are bought a nd again when sold. Th e advisors of mutual fund companies are required to achieve "best execution" thr ough brokerage arrangements so that the commissions charged to the fund will not be excessive as well as also attaining the best possible price upon buying or s elling. Brokerage commissions are incorporated into the price of securities b ought and sold and. registration expen se (the SEC charges a registration fee when funds file registration statements w ith it). 12b-1 service fees/shareholder servicing fees are contract ual fees which a fund may charge to cover the marketing expenses of the fund. Th ey are a true. Usually. funds may charge early red emption fees to discourage investors from swapping money into and out of the fun d quickly. Sales loads (or contingent deferred sales loads (CDSL)) a re included in the fund's total expense ratio (TER) because they pass through th e statement of operations for the fund. at the end of every da . they often do. When investing in a front-end load or no-load fund. The 12b-1 fees fo r back-end and level-load share classes are usually between 50 and 75 basis poin ts but may be as much as 100 basis points. forms of organization. Brokerage commissions. board of directors/trustees expense (the members of the board who overs ee the fund are usually paid a fee for their time spent at meetings). [edit] Brokerage commissions An additional expense which does not pass through the fund's income statement (s tatement of operations) and cannot be controlled by the investor is brokerage co mmissions. Being open-ended means that.Apart from the management fee. c ustodian expense (the fund's assets are kept in custody by a bank which charges a custody fee). thus. fund accounting expense. Additionally. are a component of the gain or loss on investments. are directly related to portfolio turnover which is a measur e of trading volume/velocity (portfolio turnover refers to the number of times t he fund's assets are bought and sold over the course of a year). legal/audit expense. other funds The term mutual fund is the common name for what is classified as an open-end in vestment company by the SEC. and printi ng and postage expense (incurred when printing and delivering shareholder report s). higher rate of portfolio turnover (trading) generates higher brokerage commissions. this does not mean they do not charge a distribution expense throu gh a different mechanism. While funds are often marketed as "no -load" funds. [edit] 12b-1/Non-12b-1 service fees In the United States. but is usually available only upon request or by going to the SEC's or fun d's website. real cost of investing though.250% (or 25 basis points). Fidelity Diversified International Fund (FDIVX) charges a 10 percent fee on money removed from the fund in less than 30 days. there are certain non-management expenses which m ost funds must pay. [edit] Types of mutual funds [edit] Open-end fund.

which consist mainly of stock investments.5 million) 2000 Index small-cap ($182. Except for some special transactions. The following ranges are used by Russell Indexes:[8] * * * * Russell Russell Russell Russell Microcap Index micro-cap ($54. [edit] Market Cap(italization) Fund managers and other investment professionals have varying definitions of mid -cap. are the most common typ e of mutual fund. which invest in stocks of comp anies that have the potential for large capital gains.000). S hares are issued or redeemed by institutional investors in large blocks (typical ly of 50. ETFs are traded throughout the day on a stock ex change.8 386.y.[7] Often equity funds focus investments on particul ar strategies and certain types of issuers. to effect such transacti ons. An investment company will be classified by the SEC as an open-end investmen t company if it does not issue undivided interests in specified securities (the defining characteristic of unit investment trusts or UITs) and if it issues rede emable securities. continually buying and selling securities and maintaining liquidity positio ns) and therefore tend to have lower expenses. Most investors buy and sell shares through brokers in market tran sactions.7 billion) 1000 Index large-cap ($1. for regulatory re asons. is often struct ured as an open-end investment company. the fund's shares trade with buyers and sellers of shares in the secondary market at a market-det ermined price (which is likely not equal to net asset value) such as on the New York or American Stock Exchange. which co .S. such as business trus ts. Because the institutional investors normally purchase and redeem in in kind transactions. Equity funds hold 50 percent of all amounts invested in mutual funds in the United States. but at prices generally approximating the ET F's net asset value. value Another distinction is made between growth funds. [edit] Equity funds Equity funds. the exchange-traded fund or ETF. mutual fu nds. the fund cannot continue to grow in size by attracting more investor capital like an open -end fund may. and value funds. Exchange-traded funds are also valuable for foreign investors who are often able to buy and sell securities traded on a stock market. but who. and any corporation or trust will be classified by the SEC as an investment company if it issues securities and primarily invests in non-government securiti es. just like closed-end funds. the fund continually issues new shares to investors buying into the fund and must stand ready to buy back shares from investors redeeming their shares at the then current net asset value per share.8 billion) Midcap Index mid-cap ($1. Most ETFs are index funds and track stock market indexes. Subsequently. Mutual funds must be structured as corporations or trusts.9 billion) [edit] Growth vs. Closed-end funds are like open end e xcept they are more like a company which sells its shares a single time to the p ublic under an initial public offering or "IPO".6 million 1. and large-cap ranges. [edit] Exchange-traded funds Main article: Exchange-traded fund A relatively recent innovation.8 13. Registered investment companies that are not UITs or open-end investment companies are closed-end funds. ETFs combine characteristics of both mut ual funds and closed-end funds. ETFs are more efficient than traditional mutual funds (which are continuously issuing and redeeming securities and.8 539. are limited in their ability to participate in traditional U.

e. while an actively managed fund attempts to outperform a relevant index through superior stock-picking techniques. financial theory states this is compensation for thei r greater risk.. The asse ts of an index fund are managed to closely approximate the performance of a part icular published index. which have a fixed set of time (short-. however. Money funds in t he US are required to advise investors that a money fund is not a bank deposit.ncentrate on stocks that are undervalued.[11] Mone y market funds generally entail the least risk. it has happened in the U. etc.. index funds generally have lower trading expenses than actively managed funds. 00 per share though that is not guaranteed. if a fund "breaks the buck". such as the S&P 500. 1968. Income funds ten d to be more conservative investments.generally not after 4 PM ET). as well as lower rates of return . due in part to the mortgage crisis affecting related secur ities. research.[10] [edit] Bond funds Bond funds account for 18% of mutual fund assets. Ins tead.[citation needed] [edit] Index funds versus active management Main articles: Index fund and active management An index fund maintains investments in companies that are part of major stock (o r bond) indexes. Grinblatt and Sheridan Titman. index funds do not incur expen ses to pay for selection of individual stocks (proprietary selection techniques. Unlike certificates of deposit (CDs). [edit] Funds of funds Funds of funds (FoF) are mutual funds which invest in other mutual funds (i. normal business hours during whic h redemption requests are taken . though they may be 'ins titutional' class shares that may not be within reach of an individual sharehold . they are funds composed of other funds). The funds at the underlying level are o ften funds which an investor can invest in individually. its sha res could be redeemed for less than $1. Municipal bond funds generally have lower returns. typically including some level of investment in bonds. incl uding high-yield or junk bonds.S.. medium-.500 U. While this is rare. With the potential for high yield. these bonds a lso come with greater risk. [edit] Money market funds Money market funds hold 26% of mutual fund assets in the United States. Certain empirical evidence seems to illustrate that mutual funds do not beat the market and actively managed mutual funds under-perform other broad-based portfo lios with similar characteristics.[9] An analysis of the equity funds returns of the 15 biggest asset m anagement companies worldwide from 2004 to 2009 showed that about 80% of the fun ds have returned below their respective benchmarks. High-yield bond funds invest in corporate bonds. and typically incur fewer short-term capital gains which must be passed on to shareholders. One study found that nearly 1. Growth funds tend not to pay regular dividends. A balanced fund may use a combination of strategies. an index fund manager makes fewer trades.[citation needed] Moreover. For this reason. hold or sell individual holdings. mutual funds under-performed the market in approximately half of the years between 196 2 and 1992. Most money fund strive to maintain an NAV of $1.[7] Types of bond funds include term funds. Value stocks have historically produce d higher returns. 1989). with a focus on stocks that pay dividends . on average. or long-term) befo re they mature. than does an active fund m anager. Since the composition of an index changes infrequently. not insured and may lose value. a fairly simple computer model can identify whatever changes are needed to bring the fund back into agreement with its target index.S. to stay more conservative when it comes to risk. but have tax advantages and lower risk. Additionally. open-end money fund shares are generally liquid and redeemable at "any time" (that is. f unds that performed well in the past are not able to beat the market again in th e future (shown by Jensen. y et aim for some growth.) and deciding when to buy.00 per share.

er). Some hedge fund managers are required to r egister with SEC as investment advisers under the Investment Advisers Act of 194 0. mutual funds managed by the same adv isor). if any. A fund of funds will typically charge a much lower management fee than that of a fund investing in direct securities because it is considered a fee charged for asset allocation services which is presumably less demanding than active di rect securities research and management. or statement of additional information. although there is dispute over w hether professional fund managers can. A variation of the hedge strategy is the 130-30 fund for individual investors. The cost associated with investing in an unaffiliated underlying fun d may be higher than investing in an affiliated underlying because of the invest ment management research involved in investing in fund advised by a different ad visor. a tough year in which the global stock market lost US$21 trillion in value . mutual funds are not immune to risks. which allows for cost-effective diversification. FoF's wil l often have a higher overall/combined expense ratio than that of a regular fund . Fund companies such as TIAA-CREF. [edit] Mutual funds vs. This included beating mutual funds performance in 2008. Yet. 2050. it is u sually subject to the same ups and downs and risks as the stock market. Most FoFs invest in affiliated funds (i. the more aggressive the asset mix. and Fidelity have also entered this market to provide investors w ith these options and take the "guess work" out of selecting funds. The design of FoFs is structured in such a way as to provide a ready mix of mutu al funds for investors who are unable to or unwilling to determine their own ass et allocation model. unlike mutual funds. but are usually disclosed in the fun d's annual report. the transaction costs are divided among all the mutual fund shareholders . Inc said SMAs outperformed mutual funds in 25 of 36 stock and bond market categories.e. as these both reduce the return to the investor. Vanguard. on average. although some invest in unaffilated funds (those managed by other advisor s) or both. the Wall Street Journal reported that separatel y managed accounts (SMA or SMAs) performed better than mutual funds in 22 of 25 categories from 2006 to 2008.[12] The Act does not require an adviser to follow or avoid any particular inv estment strategies. The fees charged at the underlying fund level are a real cost or drag on performance but do not pass through the FoF's income statement (statement of operations). Hedge funds typically charge a management fee of 1% or more. [edit] Share classes . There may be a "lock-up" period. The more distant the target retirement date. SEC regulation. For e xample. They share the same risks associ ated with the investments made. etc. plus a performance fee of 2 0% of the hedge fund's profit. Morningstar. FoFs have been classified into those that are actively managed (in which the investment advisor reallocates frequently among the underlying fun ds in order to adjust to changing market conditions) and those that are passivel y managed (the investment advisor allocates assets on the basis of on an allocat ion model which is rebalanced on a regular basis). prospectus. during which an investor cannot cash in shares. Recently.. The allocati on mixes usually vary by the time the investor would like to retire: 2020. The FoF should be evaluated on the combination of the fund-level expenses and underlying fund expenses. outperform simple index funds that mimic public indexes. Whether actively managed or passively indexed. If the fund invests primarily in stocks. American Century Investme nts. other investments Mutual funds offer several advantages over investing in individual stocks. [edit] Hedge funds Main article: Hedge fund Hedge funds in the United States are pooled investment funds with loose.[13][14] In the story. Investors may also benefit by having a third party (professional fund managers) apply expertise and dedicate time to manage and research investment options. nor does it require or prohibit specific investments. 2030.

Some funds have a defer red sales charge or back-end load. These generally have very high minimum investment requir ements. but will pay a commission out of the proceeds w hen shares are redeemed depending on how long they are held. a retirement plan (such as a 401(k) plan) may qualify to purchase "instituti onal" shares (and gain the benefit of their typically lower expense ratios) even though no members of the plan would qualify individually. taken as a percentage of funds invested. Class C shares usually do not convert to another class. These include other accounts in the same fund family held by the investor or various family members. instead having a contin gent deferred sales load. each class will invest in the same portfolio of securities and will have t he same investment objectives and policies. in which no sales charge is paid when buying the fund. In addition to being available from the fund company itse lf. known as classes. As a result. Another derivative structure is a level-load fund. a fund may have three classes of shares that are sold to the gene ral public Class A. The largest m .) No-load funds include both index funds and actively managed funds. each class will likely have different performance results. no-load funds may be sold by some discount brokers for a flat transaction fe e or even no fee at all.Mutual funds may offer different types of shares. a reduction in the commission paid) based on a number of varia bles. These are called no-load funds. Class B. The buyer is therefore paying the fee indirectly through the fund's expe nses deducted from profits. and that typically decreases to zero over time) and a 12b-1 fee.e. the fund may pay brokers' commis sions out of "distribution and marketing" expenses rather than a specific sales charge. and Class C and a class that is sold only to instit utional investors Class I.. In some cases. but these would be lower than a Class A s front-end sales load or a Class B s CDSL. * Class B shares often have no front-end sales load. It is possible to buy many mutual funds without paying a sales charge. * Class C shares might have a 12b-1 fee and a front-end sales load or CDSL. financial planners. [16] * Class I would be sold only to institutional investors and might have diffe rent fees and expenses. * Class A shares often have a front-end sales load (a type of fee that inves tors pay when they purchase fund shares). (This does not necessarily mean that the broker is not compensated for the transaction. in such cases.[17] [edit] Load and expenses Main article: Mutual fund fees and expenses A front-end load or sales charge is a commission paid to a broker by a mutual fu nd when shares are purchased. but a back-end load may be charged if the shares purchased are sold withi n a year. and other types of registered representatives who charge a commission for their services. Class B shares also may convert automatically to a class of shares with a lower 12b-1 fee (usu ally Class A) if held long enough. or CDSL (a type of fee paid when fund shares are sold. Load funds are sold through financial intermediaries such as brokers. by aggregating regular investments made by many individua ls. or committing to buy more of the fund within a set pe riod of time in return for a lower commission "today". For a given fund. In this type of fund an investor pays no sale s charge when purchasing shares. Shares of front-end load funds are frequently eligible for b reakpoints (i. The value of the investment is reduced by the amount of the load. But each class will have different s hareholder services and/or distribution arrangements with different fees and exp enses.[1 5] As an example.

utual fund families selling no-load index funds are Vanguard and Fidelity.org /web/20060108182807/http://www. 6. The exp ense ratio is the anticipated annual cost to the investor of holding shares of t he fund. ^ "Investment Companies". ^ "Final Rule: Registration Form Used by Open-End Management Investment Co mpanies: Sample Form and instructions". ^ Worldwide Mutual Fund Assets and Flows.2% per year versus t he typical actively managed fund's expense ratio of about 1. 2.ici.gov/rules/final/33-7512f.5% expense ratio would result in $1.S. Investment Com pany Institute. .500 of annu al expense.archive. while a 1. http://web. the advisor may have a conflict of interest in selling high-commissio n load funds. Many fee-only financial advisors strongly suggest no-load funds such as index fu nds. Load fu nds usually have even higher expense ratios when the load is considered.htm.ici. 4. Expense ratios in some no-load index funds are less than 0. Investment Company Institute (ICI).gov/answers/mfinvco.sec. U.html. on a $100. U.htm. Archived from the original on 2006-01-08. thoug h there are a number of smaller mutual fund families with no-load funds as well.5% per year. Securities and Exchange Commission (SEC).org/ stats/mf/trends_10_07. ^ "US SEC answers on Mutual Funds". Fourth Quarter 2007 5.edu/~paw/web_exclusives/features/features_19. http://www.sec. Retrieved 2007-12-01.S. an expense ratio of 0.html. Retrieved 2006-04-11. h ttp://www. Retrieved 2006-04-11. http://www. For example.htm#E12E2. Securities and Exchange Commissio n (SEC).gov/answers/mutfund.000 investment.org/funds/abt/faqs_bond_funds.2% means $ 200 of annual expense. Retrieved 2008-09-25. Retrieved 2006-04-11. Securities and Exchange Commission (SEC).princeton. These expenses are before any sales commissions paid to purchase the mutual fund.org/web/20080112045637/http://www. 7.sec.archive. ^ "Princeton Alumni Weekly article on pioneering work of John Bogle '51".html. ^ a b "Frequently Asked Questions About Bond Mutual Funds". ^ "About ICI". If the advisor is not of the fee-only type but is instead compensated by co mmissions.S. http://web. [edit] See also * * * * * * * * * * * * * * * * * * * * * * * Closed-end fund Exchange-traded fund Fund derivative Global assets under management Index fund Institutional investor Investment Company Institute Investment management List of mutual fund companies in Canada List of mutual-fund families in the United States List of US Mutual Funds By Assets Under Management Mutual funds in India Money fund Mutual-fund scandal (2003) Open-end fund Pension Retirement plans in the United States Separately managed account or SMAs Socially responsible investing Superannuation fund Unit trust Value investing Venture capital [edit] References 1. 3. U. http://www. Archived from the origi nal on 2008-01-12.

16. Cunningham.gov/answers/hedge .htm Sources of Information. 9. Retrieved 2006-04-11. U. Retr ieved 2006-04-11.asp.org/web/20060209094149/http://www. http://web. Mornings tar (registration required). The Mysterious Ways of Mutual Fund s: Market Timing.timesonline.htm. Securities and Exchange Commission (SEC). Susan (2009-02-11). ^ M. 14.gov/answers/mfclass. Archived from the original on 2006-02-09. Ian (2009-03-12).com/article/article.sec. "Global stock market losses total $21 tril lion".sec. The Wall Street Times. ^ "Hedging Your Bets: A Heads Up on Hedge Funds and Funds of Hedge Funds". Investment Company Institute. http://www. U. "Mutual Fund Performance: an Analysis of Quarterly Portfolio Holdings". Retrieved 2010-05-19. Retrieved 2006-04-23. ^ Christine Benz. "On Persistence in Mutual Fund Performance". Securities and Exchange Commission. http:// www.wsj. http://business.S. http://www. ^ "Frequently Asked Questions About Money Market Mutual Funds". "SMAs beat funds in 2008". "Which Is the Right Fund Share Class for You?". 12.S.archive . Retrieved 2010-12-05. Titman (1989).gov/investor/pubs /inwsmf. ^ Sources of Information "Invest Wisely: An Introduction to Mutual Funds".S.htm. Retrieved 2006-04-11.sec. Annual Review of Financial and Banking Law (2007) [edit] External links * S&P Mutual Fund Methodology S&P Mutual Fund Methodology [hide]v · d · eInvestment management Collective investment scheme structures Common contractual fund · Fond commun de placement · Investment trust · Unit trust · Mut ual fund · ICVC · SICAV · Unit Investment Trust · Exchange-traded fund · Offshore fund · Un tised insurance fund Investment Styles Active or Passive management · Value or Growth investing · Hedge fund · Socially respo nsible investing · Impact investing · Fund of funds · Manager of managers · Index fund Theory & Terminology Efficient-market hypothesis · Net asset value · Open-end fund · Closed-end fund Related Topics List of asset management firms · Umbrella fund · UCITS Retrieved from "http://en. 17. [edit] Further reading * Tamar Frankel & Lawrence A. ^ Thompson. ^ "Mutual Fund Classes".ici.1086/29 6468. U. 10.html. 15. Grimblatt and S. ^ Salisbury.8. http://news.asp?id= 142323.org/funds/abt/faqs_money_funds. http://www. Journal of Business 62: 393 416. ^ "U.com/US/In dexes/US/methodology. Securities and Exchange Commission (SEC).uk/tol/business/mar kets/article5705526. doi:10. Times Online (London). 11.morningstar. S.wikipedia.russell. Journal of Finance 52 (1): 56 82.co.com/article/SB123679669243098151.org/wiki/Mutual_fund" Categories: Mutualism Financial services Investment Institutional investor s Collective investment schemes Mutual funds of the United States Hidden categories: All articles with unsourced statements Articles with unsour ced statements from November 2007 Articles with unsourced statements from Augu st 2010 Personal tools * Log in / create account Namespaces .ece. 13.html. http://online. Indexes: Construction & Methodology". Retrieved 2006-04-11. ^ Mark Carhart (March 1997).

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* * * * * Simple English Sloven cina Tagalog ????? ??? * This page was last modified on 3 February 2011 at 03:44. much like any other type of company can sell stock in itself to the public. Wikipedia® is a registered trademark of the Wikimedia Foundation. a no n-profit organization. Inc.. additional terms may apply. in accordance with a stated set of o bjectives. bonds and money market instruments. * Contact us * Privacy policy * About Wikipedia * Disclaimers * Powered by MediaWiki * Wikimedia Foundation An open-ended fund operated by an investment company which raises money from sha reholders and invests in a group of assets. Mut ual funds then take the money they receive from the sale of their shares (along with any money made from previous investments) and use it to purchase various in vestment vehicles. mutual funds raise money by selling shares of the fund to the public. such as stocks. In return . See Terms of Use for details. * Text is available under the Creative Commons Attribution-ShareAlike Licens e.

bank rates have falle n down and are generally below the inflation rate. although the price of a share in a mutual fund will fluctuate daily. asset allocation fund. fund of funds. keeping large amou nts of money in bank is not a wise option. capital appreciation fund. as in real terms the value of money d ecreases over a period of time. global fund. shareholders are free to sell their shares at any time. including aggressive growth fund. regional fund. hedge fund. mu nicipal bond fund. in each of its underlying secur ities. But a common investor is not informed and competent enough to understand the intricacies of stock mar ket. For most mutual funds. but is actually an investment trust. clone fund. stock fund. in effect. income fund. and tax-free bond fund. balanced fund. Mutual funds o ffer choice. This is where mutual funds come to the rescue. closed fund. index fund.com/3173/mutual_fund. Nowadays.html#ixzz1D6dP5GEb Mutual Fund is an instrument of investing money. A mutual fund is a group of investors operating through a fund manager to purcha se a diverse portfolio of stocks or bonds. liquidity. depen ding upon the performance of the securities held by the fund. but charge fees and often require a min imum investment.investorwords. A closed-end fund is often incorrectly referred to as a mutual fund. and convenience. bond fund. international fund. Read more: http://www. equity fund. growth fund. money market fund. One of the options is to invest the money in stock market. specialty fund. Benefits of mutual funds include diversification and professional money management. prime rate fund. growth and income fund . There are many types of mutual funds. sector fund. blend f und. crossover fu nd.for the money they give to the fund when purchasing shares. Therefore. shareholders receiv e an equity position in the fund and. Mutual funds are highly cost efficien .

which invest in small / medium sized compa nies. Money market instruments are forms of debt that mature in less than one ye ar and are very liquid. one doesn't have to figure out which stocks or bo nds to buy. invest ors can purchase stocks or bonds with much lower trading costs than if they trie d to do it on their own. Hence. By pooling money together in a mutual fund.t and very easy to invest in. Diversification means spreading out money across many different types of investm ents. and short-term bonds Growth funds Growth funds are those mutual funds that aim to achieve capital appreciation by investing in growth stocks. similar to a stock. Equity mutual funds in vest pooled amounts of money in the stocks of public companies. On the basis of their structure and objective. When one investment is down another might be up. But the biggest advantage of mutual funds is diversification. mutual funds can be classified in to following major types: Closed-end funds A closed-end mutual fund has a set number of shares issued to the public through an initial public offering. As there is no standard definition classifying companies Equity funds Equity mutual funds are also known as stock mutual funds. Money market funds A money market fund is a mutual fund that invests solely in money market instrum ents. bonds. and often choose investments providing dividends as well as capital apprecia tion. Diversification of invest ment holdings reduces the risk tremendously. No load funds Mutual funds can be classified into two types . Open-end funds Open end funds are operated by a mutual fund house which raises money from share holders and invests in a group of assets Large cap funds Large cap funds are those mutual funds. International mutual funds International mutual funds are those funds that invest in non-domestic securitie . unlike conventional mutual funds Value funds Value funds are those mutual funds that tend to focus on safety rather than grow th. It is a type of mutual fund that buy s a combination of common stock. Balanced funds Balanced fund is also known as hybrid fund.Load mutual funds and No-Load mu tual funds. which seek capital appreciation by inves ting primarily in stocks of large blue chip companies Mid-cap funds Mid cap funds are those mutual funds. preferred stock. Exchange traded funds Exchange Traded Funds (ETFs) represent a basket of securities that is traded on an exchange. Also.

Sector funds Sector mutual funds are those mutual funds that restrict their investments to a particular segment or sector of the economy. usually. Akshay.kbohra@yahoo. Fund of funds A fund of funds (FoF) is an investment fund that holds a portfolio of other inve stment funds rather than investing directly in shares. Regional mutual funds Regional mutual fund is a mutual fund that confines itself to investments in sec urities from a specified geographical area. the fund's local region.com . Index funds An index fund is a a mutual fund or exchange-traded fund) that aims to replicate the movements of an index of a specific financial market. bonds or other securities .s markets throughout the world.