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What are mutul funds?
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Answer Posted / shiva reddy
A mutual fund is a type of professionally-managed
collective investment scheme that pools money from many
investors to purchase securities.[1] While there is no
legal definition of mutual fund, the term is most commonly
applied only to those collective investment schemes that
are regulated, available to the general public and open-
ended in nature. Hedge funds are not considered a type of
mutual fund.
The term mutual fund is less widely used outside of the
United States. For collective investment schemes outside of
the United States, see articles on specific types of funds
including open-ended investment companies, SICAVs, unitized
insurance funds, unit trusts and Undertakings for
Collective Investment in Transferable Securities.
In the United States, mutual funds must be registered with
the Securities and Exchange Commission, overseen by a board
of directors or board of trustees and managed by a
registered investment advisor. They are not taxed on their
income if they comply with certain requirements.
Mutual funds have both advantages and disadvantages
compared to direct investing in individual securities. They
have a long history in the United States. Today they play
an important role in household finances.
There are 3 types of U.S. mutual funds: open-end, unit
investment trust, and closed-end. The most common type, the
open-end mutual fund, must be willing to buy back its
shares from its investors at the end of every business day.
Exchange-traded funds are open-end funds or unit investment
trusts that trade on an exchange. Open-end funds are most
common, but exchange-traded funds have been gaining in
popularity.
Mutual funds are classified by their principal investments.
The four largest categories of funds are money market
funds, bond or fixed income funds, stock or equity funds
and hybrid funds. Funds may also be categorized as index or
actively-managed.
Investors in a mutual fund pay the fund’s expenses. There
is controversy about the level of these expenses. A single
mutual fund may give investors a choice of different
combinations of expenses by offering several different
types of share classes.
Note: For more ref:-
http://en.wikipedia.org/wiki/Mutual_fund
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