What is a Mutual Fund? Definition and Overview
Most investors are familiar with mutual funds by way of their retirement savings plan through an employer.
In regards to the question: “what is a mutual fund?”
Mutual funds are defined as companies that offer a basket of financial investment products to individuals, institutions, and other types of investors.
The basket of investment products provided by mutual funds include stocks, bonds, derivatives, foreign investments, CDs, fixed income products and a wide range of other domestic and international financial products.
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Additional Definition and Overview of What is a Mutual Fund?
Investors are able to purchase shares of a mutual fund which gives them ownership in partial shares of hundreds of companies and/or financial products through one or more funds.
Mutual funds are managed by professional asset managers and can be an excellent way to diversify a portfolio without having to buy individual stocks, bonds, or alternative investments.
US regulations require US based mutual funds to register with the SEC (Securities and Exchange Commission).
Additional regulations require mutual funds to be managed by registered investment advisors, and to have a board of directors that has oversight over the management and operations of the mutual fund.
In addition, the IRS exempts mutual funds from having to pay taxes on generated income and profits, so long as they comply with certain IRS requirements.
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