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Business Basics: Mutual Fund

March 19th, 2014

 

A mutual fund is an investment vehicle managed by finance professionals.  The fund has shares, or units, for the public to buy as an investment.  This is how the fund raises its money. The money is invested by the finance professionals into a chosen and balanced portfolio of securities such as corporate stocks, commodities and/or options.

 

The portfolio is created in order to match the objective of the fund listed in its prospectus, which is the legally mandated document published by every firm offering its securities to public for purchase.

 

The level of a mutual fund’s income from its portfolio determines the daily market value, or net asset value. This value determines how much its units are redeemable for on any business day and how much of a dividend is paid to the public who invested in the fund.

 

– Information compiled by Anthony Ahlegian