Mutual Funds

MUTUAL FUNDS

WHAT IS A MUTUAL FUND ?

A mutual fund is a company that pools investors' money to make multiple types of investments, known as the portfolio. Stocks, bonds, and money market funds are all examples of the types of investments that may make up a mutual fund.

The mutual fund is managed by a professional investment manager who buys and sells securities for the most effective growth of the fund. As a mutual fund investor, you become a "shareholder" of the mutual fund company.

When there are profits you will earn dividends. When there are losses, your shares will decrease in value.

One of the main advantages of mutual funds is that they give small investors access to professionally managed, diversified portfolios of equities, bonds and other securities, which would be quite difficult to create with a small amount of capital.

Mutual funds are, by definition, diversified, meaning they are made up a lot of different investments. That tends to lower your risk.

Open-ended

• Shares are issued in the fund whenever anyone wants them

Closed-ended

• With closed-ended funds, only a certain number of shares can be issued for a particular fund, and they can only be sold back to the fund when the fund itself terminates.

TYPES

Refers to the sales charges added to a mutual fund when you purchase it. The load charge goes to the fund salesperson as a commission and payment for their research services.

Load charges can be a front-end load ( you pay it when you buy the mutual fund) or a back-end load (you pay when you sell the mutual fund).

LOAD

Equity funds are made up of investments of only

common stock. These can be riskier (and earn more money) than other

types.

Fixed-income funds are made up of

government and corporate securities that provide a fixed

return and are usually low risk.

Balanced funds combine both

stocks and bonds in the investment pool and

offer a moderate to low risk

CATEGORIES

HEDGE FUND A hedge fund is an investment partnership.

The limited partners contribute the money and the general partner manages it according to the fund's strategy. A hedge fund's purpose is to maximize investor returns and eliminate risk, hence the word "hedge.“

HEDGE LIKE FUNDS A mutual fund that adopts an alternative

investment strategy, much like a hedge fund. Hedge-like mutual funds aim to increase investor returns by utilizing investment methods typically used by hedge funds, while maintaining the convenience and availability to investors wishing to invest in mutual funds.

The key differences are that hedge-like funds are regulated by the SEC(Securities and Exchange Commission), and potential investors in hedge-like funds do not need to be considered accredited investors to invest.