Mutual fund

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Mutual fund
Mutual fund is a form of collective investment that pools money from many
investors and invests their money in stocks, bonds, short-term money market
instruments, and other securities. In a mutual fund, the manager trades the fund's
underlying securities, realizing capital gains or losses, and collects the dividend or
interest income. The investment proceeds are then passed along to the individual
investors.
Mutual funds are purchased either: directly from a company or indirectly from a
sales agent, including securitie firms, banks and financial planners.
Usage of Mutual fund
Mutual funds can invest in many different kinds of securities. The most common
are cash, stock, and bonds, but there are a lot of sub-categories. Stock funds, can
invest primarily in the shares of a particular industry, such as technology or utilities.
These are called sector funds.
Most mutual funds' investment portfolios are continually adjusted by a
professional manager, who forecasts the future performance of investments
appropriate for the fund. A mutual fund is administered through a main management
company, which may hire or fire fund managers.
Mutual funds are subject to a special set of regulatory, accounting, and tax rules.
They are not taxed on their income as long as they distribute substantially all of it to
their shareholders. Also, the type of income they earn is often unchanged as it passes
through to the shareholders. Mutual fund distributions of tax-free municipal bond
income are also tax-free to the shareholder.
Types of mutual funds
The term mutual fundis the name for an open-end investment company. Open-end
means that, at the end of a day, the fund issues new shares to investors and buys back
shares from investors wishing to leave the fund. Mutual funds can be structured as
corporations or business trusts.
Exchange-traded funds
The exchange traded fund (ETF), is often...