Pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. Mutual funds give small investors access to professionally managed, diversified portfolios of equities, bonds and other securities, which would be quite difficult (if not impossible) to create with a small amount of money.
Each shareholder participates proportionally in the gain or loss of the fund. Mutual fund units, or shares, are issued and can typically be purchased or redeemed as needed at the fund's current net asset value (NAV) per share, which is sometimes expressed as NAVPS.
Mutual funds are operated by money managers, who invest the fund's capital and attempt to produce capital gains and income for the fund's investors. A mutual fund portfolio is structured and maintained to match the investment objectives stated in its prospectus. However, because Mutual Funds have specific directives, their investment strategies and opportunities are often limited. With their hands tied in many cases, it is difficult for most Mutual Fund managers to consistently beat the market.
What's In It For Mutual Fund Company?
Money managers of Mutual Funds and ETFs are usually paid based on how much money they manage. Hedge Funds, on the other hand, are primarily paid based on profits. So, the incentive for a Hedge Fund manager to be paid well is to make a lot of money every year as opposed to Mutual Funds and ETF managers, who's incentive is to have more money to manage.
Mutual Fund Monday,
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