Stocks options and mutual funds are buying


Bond, stock, and hybrid funds may be classified as either index or passively-managed funds or actively managed funds. Money market funds invest in money market instruments, which are fixed income securities with a very short time to maturity and high credit quality. Investors often use money market funds as a substitute for bank savings accounts , though money market funds are not insured by the government, unlike bank savings accounts. Other money market funds must compute a net asset value based on the value of the securities held in the funds.

Bond funds invest in fixed income or debt securities. Bond funds can be sub-classified according to:. Stock, or equity, funds invest in common stocks. Stock funds may focus on a particular area of the stock market, such as. Hybrid funds invest in both bonds and stocks or in convertible securities.

Balanced funds, asset allocation funds, target date or target risk funds, and lifecycle or lifestyle funds are all types of hybrid funds. Hybrid funds may be structured as funds of funds , meaning that they invest by buying shares in other mutual funds that invest in securities.

Many funds of funds invest in affiliated funds meaning mutual funds managed by the same fund sponsor , although some invest in unaffiliated funds i. Investors in a mutual fund pay the fund's expenses. Some of these expenses reduce the value of an investor's account; others are paid by the fund and reduce net asset value.

The management fee is paid by the fund to the management company or sponsor that organizes the fund, provides the portfolio management or investment advisory services and normally lends its brand to the fund.

The fund manager may also provide other administrative services. The management fee often has breakpoints, which means that it declines as assets in either the specific fund or in the fund family as a whole increase. The fund's board reviews the management fee annually.

Fund shareholders must vote on any proposed increase, but the fund manager or sponsor can agree to waive some or all of the management fee in order to lower the fund's expense ratio.

Distribution charges pay for marketing, distribution of the fund's shares as well as services to investors. There are three types of distribution charges. A mutual fund pays expenses related to buying or selling the securities in its portfolio. These expenses may include brokerage commissions. These costs are normally positively correlated with turnover. Shareholders may be required to pay fees for certain transactions, such as buying or selling shares of the fund.

For example, a fund may charge a flat fee for maintaining an individual retirement account for an investor. Some funds charge redemption fees when an investor sells fund shares shortly after buying them usually defined as within 30, 60 or 90 days of purchase ; redemption fees are computed as a percentage of the sale amount.

Shareholder transaction fees are not part of the expense ratio. The expense ratio equals recurring fees and expenses charged to the fund during the year divided by average net assets. The management fee and fund services charges are ordinarily included in the expense ratio; front-end and back-end loads, securities transaction fees and shareholder transaction fees are normally excluded. To facilitate comparisons of expenses, regulators generally require that funds use the same formula to compute the expense ratio and publish the results.

In the United States, a fund that calls itself " no-load " cannot charge a front-end load or back-end load under any circumstances and cannot charge a distribution and services fee greater than 0. Critics of the fund industry argue that fund expenses are too high. They believe that the market for mutual funds is not competitive and that there are many hidden fees, so that it is difficult for investors to reduce the fees that they pay. They argue that the most effective way for investors to raise the returns they earn from mutual funds is to invest in funds with low expense ratios.

Fund managers counter that fees are determined by a highly competitive market and, therefore, reflect the value that investors attribute to the service provided. They also note that fees are clearly disclosed. Mutual funds in the United States are required to report the average annual compounded rates of return for one-, five-and ten year-periods using the following formula: Market capitalization equals the number of a company's shares outstanding multiplied by the market price of the stock.

Market capitalization is an indication of the size of a company. Typical ranges of market capitalizations are:. A fund's net asset value NAV equals the current market value of a fund's holdings minus the fund's liabilities. This figure may also be referred to as the fund's "net assets". It is usually expressed as a per-share amount, computed by dividing net assets by the number of fund shares outstanding. Funds must compute their net asset value according to the rules set forth in their prospectuses; most compute their NAV at the end of each business day.

Valuing the securities held in a fund's portfolio is often the most difficult part of calculating net asset value. The fund's board typically oversees security valuation. A single mutual fund may give investors a choice of different combinations of front-end loads, back-end loads and distribution and services fee, by offering several different types of shares, known as share classes. All of them invest in the same portfolio of securities, but each has different expenses and, therefore, a different net asset value and different performance results.

Some of these share classes may be available only to certain types of investors. Typical share classes for funds sold through brokers or other intermediaries in the United States are:. Turnover is a measure of the volume of a fund's securities trading. It is expressed as a percentage of average market value of the portfolio's long-term securities. Turnover is the lesser of a fund's purchases or sales during a given year divided by average long-term securities market value for the same period.

If the period is less than a year, turnover is generally annualized. From Wikipedia, the free encyclopedia. Financial history of the Dutch Republic. Mutual fund fees and expenses. The Origins of Value: The Rise of Mutual Funds. How Your Money is Managed 2nd ed. Sample Form and instructions". Stock fund Bond fund Money market fund. Real estate investment trust Private equity fund Venture capital fund , Mezzanine investment funds , Vulture fund Hedge fund.

Long-only fund Stable value fund. Mutual fund Open-end fund Exchange-traded fund Closed-end fund Real estate investment trust. Hedge fund Private equity fund Pooled income fund Endowment fund Pension fund Sovereign wealth fund Sovereign investment fund. Absolute return Total return. Alternative investments Traditional investments Net asset value Assets under management Rate of return Time-weighted return Money-weighted rate of return.

Closed-end fund Efficient-market hypothesis Net asset value Open-end fund. Economic history of the Netherlands. Retrieved from " https: Mutual fund families Mutualism movement Institutional investors Dutch inventions 18th-century introductions.

In other jurisdictions, open-funds may only be required to buy back shares at longer intervals. Most open-end funds also sell shares to the public every business day; these shares are priced at NAV. Most mutual funds are open-end funds. Closed-end funds generally issue shares to the public only once, when they are created through an initial public offering.

Their shares are then listed for trading on a stock exchange. Investors who want to sell their shares must sell their shares to another investor in the market; they cannot sell their shares back to the fund. The price that investors receive for their shares may be significantly different from NAV; it may be at a "premium" to NAV i. Unit investment trusts UITs are issued to the public only once, when they are created. UITs generally have a limited life span, established at creation.

Investors can redeem shares directly with the fund at any time similar to an open-end fund or wait to redeem them upon the trust's termination. Less commonly, they can sell their shares in the open market. Unlike other types of mutual funds, unit investment trusts do not have a professional investment manager.

Their portfolio of securities is established at the creation of the UIT. ETFs combine characteristics of both closed-end funds and open-end funds. ETFs are traded throughout the day on a stock exchange. An arbitrage mechanism is used to keep the trading price close to net asset value of the ETF holdings. Mutual funds are normally classified by their principal investments, as described in the prospectus and investment objective.

The four main categories of funds are money market funds, bond or fixed income funds, stock or equity funds, and hybrid funds. Within these categories, funds may be subclassified by investment objective, investment approach or specific focus.

The types of securities that a particular fund may invest in are set forth in the fund's prospectus , a legal document which describes the fund's investment objective, investment approach and permitted investments.

The investment objective describes the type of income that the fund seeks. For example, a capital appreciation fund generally looks to earn most of its returns from increases in the prices of the securities it holds, rather than from dividend or interest income. The investment approach describes the criteria that the fund manager uses to select investments for the fund. Bond, stock, and hybrid funds may be classified as either index or passively-managed funds or actively managed funds.

Money market funds invest in money market instruments, which are fixed income securities with a very short time to maturity and high credit quality.

Investors often use money market funds as a substitute for bank savings accounts , though money market funds are not insured by the government, unlike bank savings accounts. Other money market funds must compute a net asset value based on the value of the securities held in the funds. Bond funds invest in fixed income or debt securities. Bond funds can be sub-classified according to:. Stock, or equity, funds invest in common stocks.

Stock funds may focus on a particular area of the stock market, such as. Hybrid funds invest in both bonds and stocks or in convertible securities. Balanced funds, asset allocation funds, target date or target risk funds, and lifecycle or lifestyle funds are all types of hybrid funds.

Hybrid funds may be structured as funds of funds , meaning that they invest by buying shares in other mutual funds that invest in securities. Many funds of funds invest in affiliated funds meaning mutual funds managed by the same fund sponsor , although some invest in unaffiliated funds i.

Investors in a mutual fund pay the fund's expenses. Some of these expenses reduce the value of an investor's account; others are paid by the fund and reduce net asset value. The management fee is paid by the fund to the management company or sponsor that organizes the fund, provides the portfolio management or investment advisory services and normally lends its brand to the fund.

The fund manager may also provide other administrative services. The management fee often has breakpoints, which means that it declines as assets in either the specific fund or in the fund family as a whole increase. The fund's board reviews the management fee annually. Fund shareholders must vote on any proposed increase, but the fund manager or sponsor can agree to waive some or all of the management fee in order to lower the fund's expense ratio.

Distribution charges pay for marketing, distribution of the fund's shares as well as services to investors. There are three types of distribution charges.

A mutual fund pays expenses related to buying or selling the securities in its portfolio. These expenses may include brokerage commissions. These costs are normally positively correlated with turnover.

Shareholders may be required to pay fees for certain transactions, such as buying or selling shares of the fund. For example, a fund may charge a flat fee for maintaining an individual retirement account for an investor. Some funds charge redemption fees when an investor sells fund shares shortly after buying them usually defined as within 30, 60 or 90 days of purchase ; redemption fees are computed as a percentage of the sale amount.

Shareholder transaction fees are not part of the expense ratio. The expense ratio equals recurring fees and expenses charged to the fund during the year divided by average net assets. The management fee and fund services charges are ordinarily included in the expense ratio; front-end and back-end loads, securities transaction fees and shareholder transaction fees are normally excluded.

To facilitate comparisons of expenses, regulators generally require that funds use the same formula to compute the expense ratio and publish the results. In the United States, a fund that calls itself " no-load " cannot charge a front-end load or back-end load under any circumstances and cannot charge a distribution and services fee greater than 0.

Critics of the fund industry argue that fund expenses are too high. They believe that the market for mutual funds is not competitive and that there are many hidden fees, so that it is difficult for investors to reduce the fees that they pay.

They argue that the most effective way for investors to raise the returns they earn from mutual funds is to invest in funds with low expense ratios. Fund managers counter that fees are determined by a highly competitive market and, therefore, reflect the value that investors attribute to the service provided. They also note that fees are clearly disclosed. Mutual funds in the United States are required to report the average annual compounded rates of return for one-, five-and ten year-periods using the following formula: Market capitalization equals the number of a company's shares outstanding multiplied by the market price of the stock.

Market capitalization is an indication of the size of a company. Typical ranges of market capitalizations are:. A fund's net asset value NAV equals the current market value of a fund's holdings minus the fund's liabilities. This figure may also be referred to as the fund's "net assets". It is usually expressed as a per-share amount, computed by dividing net assets by the number of fund shares outstanding. Funds must compute their net asset value according to the rules set forth in their prospectuses; most compute their NAV at the end of each business day.

Valuing the securities held in a fund's portfolio is often the most difficult part of calculating net asset value. The fund's board typically oversees security valuation. A single mutual fund may give investors a choice of different combinations of front-end loads, back-end loads and distribution and services fee, by offering several different types of shares, known as share classes.

All of them invest in the same portfolio of securities, but each has different expenses and, therefore, a different net asset value and different performance results. Some of these share classes may be available only to certain types of investors.