MUTUAL FUNDS Introduction Th

Mutual Funds: Definition, Purpose, and Types

A mutual fund is a particular type of investment company. Specifically, a mutual fund is an openend investment company. An openend investment company is one that does not have a fixed amount of capital stock, and continues to sell additional shares to the public as demand warrants. The term mutual fund indicates that the investment company represents a mutual pooling of the investment funds of a large number of people.

There are many different types of mutual funds, such as growth funds, diversified funds, balanced funds, money market funds, and so forth. These fund types describe the types of securities held by the investment company. Thus, investors can select a fund that specializes in the types of investment vehicles with which they are comfortable.

Mutual funds may also be distinguished as either load or noload funds. A load fund charges a fee at the time of share purchase in the fund to cover selling and administrative expenses.

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significant of the characteristics of the typical small investor. With a relatively small amount of money to invest, flexibility in investment vehicles is also a significant need of the typical small investor. Thus, it is important for such investors to choose a broker which is able to provide a wide variety of investment vehicles. In this same context, it is important for the typical small investor to have available a source of asset management advice. Costs are important to the typical small investor, as, indeed, they are important to all investors. The small investor, however, must weigh the direct savings available through broker fee structures against the indirect losses which may result from investments made without the benefit of expert knowledge. When the characteristics and functions of the different broker types are compared with the characteristics and needs of the typical small investor, it becomes readily apparent that the characteristics of the fullservice broker correlate more closely with the needs of many small investors than do the characteristics of the other two broker types. The strengths of the fullservice broker, in the context of the needs of the typical small investor are (1) investment advice,
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Approximate Pages = 21 (250 words per page)

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