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What is a mutual fund?
Transcript of What is a mutual fund?
By: Sabine Guiteau
Who operates a mutual fund?
A mutual fund is operated by a manager.
The manager invests the fund's capital and attempts to produce capital gains and income for the funds investors
Manager must register with the SEC
Advantages of mutual funds:
It is simple
It is affordable
Disadvantages of mutual funds:
How does it make me money?
Issue units to investors with the quantity of money invested by the investor
Value of each unit is called NAV
NAV is reflective of the current market value of the single fund holding after expenses and management costs
Number of units an investor can buy:
Based on two factors:
NAV of each unit
Total amount of investment
A mutual fund is an investment vehicle made up of a pool of funds collected from many investors for the purpose of investing in securities, such as, bonds, stocks etc.
How is NAV per unit calculated?:
market value of securities (change daily)
- total reoccurring expenses
total number of units
Types of mutual funds:
open ended- place no limit on the number of investors that can join
close ended-mutual fund closes to new memeber
How to get a mutual fund?
Through a brokerage
Through your company's 401k program
Via you own IRA
Kinds of mutual funds:
Equity- long-term investments resulting in capital gains
Fixed income- Relies mainly on bonds
Money markets- Mostly full of treasury bills
Can invest in mutual funds that specialize in different types of stocks. For example- technology stocks, or capitalization stocks
A fund manager can receive a load- commission
Mutual funds are traded after the market closes for the day because funds share prices are based on the NAV of whats in the fund, which is determined after the market closes