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 ?
0 trillion in mutual funds, according to Investment Company Institute.
It occurs when a mutual fund or intermediary permits an investor to purchase fund shares "late," after the day's NAV has been calculated, as though the purchase order had been placed before the NAV was calculated.
Index funds tend to be more tax efficient than other mutual funds.
8,672 mutual funds, reports that the nation's 95 million mutual fund shareholders are typically pursuing long-term financial goals such as retirement security or paying education costs for children.
The mutual fund industry has just about the same amount of assets, but there are something like 350 examiners to do the same kind of work.
All the stars are aligned for a major overhaul of the mutual fund industry in 2004.
In a somewhat related issue, consider what would happen if the mutual fund generated a net short-term capital loss instead of a short-term gain of $2,000 in the above example.
To attract money into this unknown mutual fund, Fidelity could waive the load; such decisions were a key component of mutual fund marketing.
It is critical for potential investors to understand that mutual funds -- like many other investment products such as individual stocks and bonds -- carry risk, including the possible loss of principal.
A depository insitution should also disclose the existence of any advisory or other material relationship between the institution, or an affiliate of the instutition, and a mutual fund whose shares are sold by the institution.
3 As measured by mutual fund assets under management as of 12/31/2006 (Source: Strategic Insight).
Tax-awareness affects the selection of professional money managers and mutual funds, as well as whether to use a passive investment or active management strategy.

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