Essay Mutual Funds

Submitted By bruno2345
Words: 702
Pages: 3

One of the best definitions to mutual fund that I found is: an investment vehicle that is made up of a 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 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's portfolio is structured and maintained to match the investment objectives stated in its prospectus.
There a lot of different types of mutual fund like closed fund, incubated fund and front ended load fund. The two mutual funds that I`m going to talk about is open-ended load fund, open-ended no loaded fund and I`m also going to write about ETFs.
An open-ended load fund is a type of mutual fund that does not have restrictions on the amount of shares the fund will issue. If demand is high enough, the fund will continue to issue shares no matter how many investors there are. Open-end funds also buy back shares when investors wish to sell. The majority of funds are open-ended funds because it provides investors with a very useful and convenient investing vehicle. This type of fund charges a commission every time you purchase a fund. Some of the fees cover the cost or distributing the fund by paying commission to the adviser or broker that arranged the purchase. Most open-end funds are actively managed, meaning that a portfolio manager picks the securities to buy. Open-end mutual funds price their shares in terms of a Net Asset Value (NAV). NAV is calculated by adding up the market value of all the fund's underlying securities, subtracting all of the fund's liabilities, and then dividing by the number of outstanding shares in the fund. The resulting NAV per share is the price at which shares in the fund are bought and sold. Mutual funds only calculate their NAVs once per trading day, at the close of the trading session.
Class A shares typically impose a front-end sales load. They also tend to have a lower 12b-1 fee and lower annual expenses than other mutual fund share classes. Class B shares typically do not have a front-end sales load. Instead, they may impose a contingent deferred sales load and a 12b-1 fee (along with other annual expenses). And class C shares might have a 12b-1 fee, other annual expenses, and either a front- or back-end sales load. But the front- or back-end load for Class C shares tends to be lower than for Class A…