Reference: Mutual Funds
A mutual fund, also called an open-end investment company,
owns the securities of several corporations and receives dividends on
the shares that it holds. The earnings of a mutual fund are distributed
to the holders of its shares. See M. Useem, Investor Capitalism: How
Money Managers Are Changing the Face of Corporate America (1996).
A mutual fund enables investors to pool their money and
place it under professional investment management. A new innovation,
the exchange traded fund (ETF) combines characteristics of both open
and closed end mutual funds. Dalbar Inc. consultancy studied mutual
fund stock returns over the period from 1984 to 2000. Dalbar found that
the average stock fund returned 14 percent; during that same period,
the typical mutual fund investor had a 5.3 percent return ([1]).
The mutual fund scandal of 2003 was the result of the
discovery of both illegal and unethical trading practices on the part
of certain hedge fund and mutual fund companies. Bank of America is
charged with permitting Canary to purchase mutual fund shares, after
the markets had closed, at the closing price for that day. In the
United States, mutual fund prices are set once daily at 4:00 p.m.
Canary Capital settled the complaint for US$40 million, while neither
admitting nor denying guilt in the matter.
Money funds (or money market funds, money market mutual
funds) are mutual funds that invest in short-term debt instruments. And
like other mutual funds, each investor who invests in a money fund is
considered a shareholder of the investment pool, a part-owner of the
fund.
There are hundreds of families and thousands of individual
mutual funds, too many to list here; see the fund family's Web site or
one of the third-party resources mentioned in the mutual funds article
for more information. In addition, many banks, brokerages, and
insurance companies have affiliated fund families.
Fact Monster/Information Please Database, 2005 Pearson
Education, Inc. All rights reserved.
Modern socially responsible investing has evolved into two
groups largely differentiated by political orientation.
John Bogle did a study whereby he found around three fourths of mutual funds do not earn more money than if they were to invest in the largest 500 companies simultaneously, using the Standard Poor's 500 stock index as a bogey. Having founded the Vanguard Group as a broker-sold mutual fund company he eventually turned the company into a no-load fund firm and in 1976 introduced his first index fund. Since its founding in 1975, Vanguard has grown to become the world’s largest pure no-load mutual fund company.
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