mutual fund

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mutual fund,

in finance, investment company or trust that has a very fluid capital stock. It is unique in that at any time it can sell or redeem any of its outstanding shares at net asset value (i.e., the price of a share equals total assets minus liabilities divided by the total number of shares). A mutual fund, also called an open-end investment company, owns the securities of several corporations and receives dividends on the shares that it holds. A closed-end investment company differs from an open-end company in that the number of shares is limited and the price of the shares may fluctuate above and below the net asset value. The earnings of a mutual fund are distributed to the holders of its shares. It is hoped that a loss on one holding will be made up by a gain on another. The holders of mutual-fund shares thus gain the advantage of diversification, which might ordinarily be beyond their means. Common mutual funds, which often provide skilled management for security holdings, include stock, bond, balanced, index, and money-market fundsmoney-market fund,
type of mutual fund that invests in high-yielding, short-term money-market instruments, such as U.S. government securities, commercial paper, and certificates of deposit. Returns of money-market funds usually parallel the movement of short-term interest rates.
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. Stock funds mainly invest in common shares, and bond funds in bonds; such funds may specialize in a particular category of stocks or bonds (such as Internet stocks or municipal bonds). A balanced fund might invest in preferred stocks and bonds in addition to common stocks. Index funds invest in a portfolio that mimics a given index, such as the stocks that make up the S&P 500. The forerunner of the modern mutual fund was established in Belgium in 1822, and the use of these closed-end investment companies soon spread to Great Britain and France. They became popular in the United States in the 1920s, but from the 1930s the open-end mutual fund became more popular. Mutual funds experienced a period of tremendous growth after World War II, especially in the 1980s and 90s.

Bibliography

See M. Useem, Investor Capitalism: How Money Managers Are Changing the Face of Corporate America (1996).

References in periodicals archive ?
This article addresses specifically a sale of stock and/or redemption of non-IRA mutual fund shares to fund the current year's IRA contribution.
For the treatment of mutual fund shares that were held as part of a conversion transaction, see Q 7706 and Q 7707.
If our investor had capital loss carry-forwards from the previous three years, he could use them to reduce the capital gains realized upon redemption of the mutual fund shares.
com), investors can set up online accounts with no minimum required, and use dollar-cost averaging to purchase stocks and mutual fund shares.
When mutual fund shares are sold, one of four methods will determine cost basis: specific identification, first in-first out (FIFO), average cost (single-category), or average cost (double-category).
During this period, [Securities America] failed to establish and maintain a supervisory system and procedures reasonably designed to ensure that eligible customers who purchased mutual fund shares received the benefit of applicable sales charge waivers," FINRA said.
Mutual fund shareholders of each Fund will receive units of a mutual fund trust with a value equal to the value of their mutual fund shares of a Fund.
The IRS says Form 1099-B, Proceeds from Broker and Barter Exchange Transactions, will be expanded in 2011 to include the cost or other basis of stock and mutual fund shares sold or exchanged during the year, and stockbrokers and mutual fund companies will use Form 1099-B, Proceeds from Broker and Barter Exchange Transactions, to report this information at year end.
2) The "average basis" methods discussed in Q 1171 for mutual fund shares are not available to REIT shareholders.
When you sell mutual fund shares in a taxable account, however, you have to report a gain or loss.
The charges claim some of the funds, not all, of the above companies have condoned allowing certain investors to trade after hours at preclosing values and to buy and sell mutual fund shares over short periods to turn a quick profit, a practice called "timing.
The fees and other costs that investors pay as part of owning mutual fund shares can significantly affect their investment returns.

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