A mutual fund's capital is invested in a group (portfolio) of corporate securities, commodities, options, etc., that match the fund's objectives detailed in its prospectus. The level of a mutual fund's income from its portfolio determines the daily market value (called net asset value) at which its units are redeemable on any business day, and the dividend paid to its unit holders. Mutual funds are of two main types: (1) open end fund, where the capitalization of the fund is not fixed and more units may be sold at any time to increase its capital base, (2) closed end fund, where capitalization is fixed and limited to the number of units authorized at the fund's inception (or as formally altered thereafter). Mutual funds usually charge a management fee (typically between 1 and 2 percent of the fund's annual earnings) and may also levy other fees and sales commission (called 'load') if units are bought from a financial advisor. The term mutual fund, used mainly in the US, has no legal bearing, and may be referred to as unit investment trust or a unit trust in the UK and other British Commonwealth countries.
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Use mutual fund in a sentence
She didn't want to invest in any in particular stock, so she invested in a broad index mutual fund to lower her risk.
The economics students prepared for their lessons on mutual funds by researching corporate security and portfolio options to determine the daily market value.
When researching investment options for his retirement savings, Jeff decided that mutual funds with a mix of stocks and bonds would be the best choice for his personal goals.