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Tip of the Day Seek Professional Help

Seek Professional Help - For most of us our days are busy enough and trying to plan an investment strategy is beyond our means of understand or our time requirements....

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Mutual Investment Fund

Mutual investment funds are a collection of investments that are professionally managed using pools of investor's money to offer the benefits of greater spending power. These savings collections are combinations of stocks and bonds, money market instruments and other types of securities available on the market. Mutual fund companies usually assign a fund manager who is given the ability and legal authority to make trades on behalf of the investors who have bought into the pool. Annually the net profits (or losses) are distributed equally among the investors.

Three main types of investment companies operate in the United States going back as far as 1940 and they deal with open-end funds (mutual funds), unit investment trusts (UITS), and closed-end funds. Canada also follows these three types of investment structures but the rest of the world they use the generic mutual fund title for most of their investment programs.

Mutual funds have the advantage of being able to invest in many types of securities with the most common still being stocks and bonds. There are though, many sub-categories such as Stock bonds that invest in a particular industry like technology. Bond funds are also classified according to the risk factor such as high yield, Junk bonds, or investment grade corporate bonds. Of course bonds by government agencies, province or municipalities are safer than say exploratory mining but their yield may be less over a long term investment.

Mutual fund investment portfolios should be continually adjusted by the professional fund manager as he forecasts things such as cash flow of each segment of the portfolio. It is up to him to study and know performance, history and projected futures of each fund he invests in for his clients. An experienced fund manager will strive to insure the investments the fund is holding match the funds stated investment objectives

Mutual funds are also subject to varying accounting, regulatory and tax rules and in the United States for example; mutual funds are not taxed on income that is 90% distributed to their shareholders and meet diversification regulations as laid down in the Internal Revenue Code.

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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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