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About Mutual Fund

The mutual fund is a type of collective investment scheme that is professionally managed. It pools the money from many investors, in order to invest in a wide variety of assets. These assets include stocks, bonds, short-term money market instruments, and a host of other securities. Assets are mixed together in order to achieve the projected returns for the fund. When conditions change, assets are sold so that more appropriate assets may be purchased.

This fund has a fund manager. He is in charge of making trades, or purchases, with this pooled money on a regular basis. The net proceeds or losses are usually distributed to the investors annually.

Mutual funds are usually termed an open-end fund. This means that shares can be issued or redeemed at any time. The shares are generally purchased directly from the fund, and not from the other shareholders.

If fees are charged for purchases or redemptions, then it is called a load fund. If they're not levied, then it is called a no-load fund. This does not include other brokerage fees, though. Brokerages often charge commissions, yearly maintenance fees, inactivity fees, and other fees. These commissions and fees are described in the prospectus, or brochure.

Each share is assigned a price. This is determined by its NAV, or Net Asset Value. The value is calculated when dividing the fund's assets minus liabilities by the number of shares outstanding. It is usually calculated at the end of every trading day.

There are many advantages for the investor when he chooses mutual funds. The investor has combined his money with other investors. All purchasing fees are spread among the fund investors. Finally, the investor can rely on a professional fund manager to use his knowledge and expertise to make timely investments for him.

In most cases, mutual funds outperform individual purchases of stocks and other securities. This is because the funds are spread over a specific sector or mix of securities. With this approach, the market downturns are less noticeable. It is rare when downturns affect several companies, countries or industries at once. This is what makes mutual funds so appealing.

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Definition of the Day Distribution Plan

Distribution Plan - a distribution plan is a plan executed by mutual fund companies. The purpose of the plan is too collect and assesses fees to shareholders of the funds, to offset expenses. The expenses could be for advertising costs or sales incentives (rewards for good behavior). The distribution plan...

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