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.


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

References in periodicals archive ?
Open-end investment companies, commonly known as mutual funds, do not issue shares in their funds for resale to other potential shareholders.
As was mentioned, a fund's tax efficiency is not an issue when selecting mutual funds for retirement account assets.
While the scandal concerns him, Perkins feels there are few choices for most individual investors other than mutual funds.
financial system, mutual funds had been almost entirely spared the bad headlines and lawsuits--that is, until September 2003, when New York State Attorney General Eliot Spitzer revealed that a number of mutual funds were ignoring, or worse, facilitating, illegal or questionable trading by certain individuals and investment institutions, including hedge funds.
The Investment Company Institute (ICI), the industry group that represents mutual funds, also testified during the House hearing and made several recommendations to restore and reinforce investor confidence.
To offer the small investor instant diversification among hundreds or thousands of securities, mutual funds must pool investor dollars.
57--and poised, after a lull, to make its next great surge--there were 1,246 mutual funds in America.
In some cases advisers told clients who came to them with older portfolios invested in these mutual funds to continue holding them because tax consequences made liquidating them impractical, says Randi Grant, CPA/PFS, a partner with CPA firm Berkowitz Dick Pollack & Brant in Florida.
I suggest you take a careful study of the Ariel mutual funds and the mutual funds you are invested in within your 401(k) plan and reassess which funds best fit your risk tolerance and investment goals.