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Mutual Fund

As a means of investment, mutual funds are collective arrangements. Individual investors purchase shares in the fund which is managed by a broker who in turn uses the monies invested to buy stocks, bonds, and short-term money market vehicles on behalf of the shareholders. In this manner the fund realizes capital gains and losses and pays out dividends and interest when applicable.

Normally a given mutual fund will have a specific investment emphasis or goal. A fund may concentrate on stocks with a specific market capitalization, for instance mid-cap or large-cap, or it my seek to achieve "aggressive growth." The net value of a share in a fund is figured daily based on the total value of the fund divided by the number of shares purchased. The benefit of investing in mutual funds is to gain the advantage of professional management and portfolio diversification with an overall reduction of investment volatility.

More Glossary Terms Explained here


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