Glossary - Mutual Fund
A mutual fund is an investment vehicle 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 other assets. Mutual funds are operated by professional money managers, who allocate the fund's assets and attempt to produce capital gains or income for the fund's investors. A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus.
Also known as
- Investment Company
- Managed Fund
Use cases examples
- Prospectus: The XYZ Mutual Fund, according to its prospectus, aims to provide investors with capital appreciation by investing at least 80% of its assets in the equities of technology companies.
- Annual Report: In the 2022 Annual Report of the ABC Income Fund, it was reported a net income of $5 million, derived from its diversified bond holdings, to be distributed to its shareholders.
Considerations for investors
- Investors should evaluate the fund's management fees and expense ratios as these can significantly impact the returns on investment in mutual funds.
- Considering the fund's performance history and investment strategy to ensure alignment with the investor's own risk tolerance and investment objectives is crucial.
Considerations for founders
- Founders should understand mutual funds as potential sources of investment for their startups, particularly those funds focused on venture capital or emerging businesses.
- Consider the investment thesis and fund structure of mutual funds as they may have long-term investment horizons that do not align with the startup's growth expectations or exit strategy.
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