What is mutual funds?

A mutual fund is an investment fund which take money from many different investors and invest in different securities. Mutual funds have professional fund managers who define where to invest money based on scheme type based on government rules. Mutual funds belongs to Asset Management company

Each country have different government bodies who regulates mutual fund houses. Below I have mentioned top list of government regulators by country

Government Regulatory Bodies for Mutual Funds

 

Due to lot of awareness in investors and latest trend there are lot of mutual funds in different categories. I have mentioned Market size of mutual funds based on end of 2020 data for different countries

Mutual fund Market size country wise

  • United States: $23.9 trillion
  • Australia: $5.3 trillion
  • Ireland: $3.4 trillion
  • Germany: $2.5 trillion
  • Luxembourg: $2.2 trillion
  • France: $2.2 trillion
  • Japan: $2.1 trillion
  • Canada: $1.9 trillion
  • United Kingdom: $1.9 trillion
  • China: $1.4 trillion

There are different type of fund structures. I have mentioned primary structures

Fund structures in Mutual Funds

  • Open End Funds

    • Open-end mutual funds must be buy their shares from their investors at the net asset value (NAV) computed that day based upon the prices of the securities owned by the mutual fund
  • Unit Investment Trusts(UIT)

    • 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 investment directly with the fund at any time point of time or wait to redeem them upon the trust’s termination.
  • Closed End Funds

    • Closed-end funds issue shares to the public only once, when they are listed through an initial public offering(IPO). Closed-end funds shares are then publicly listed. Investors have to sell their shares to another investor in the market. They cannot sell their shares back to the fund.

As I mentioned earlier funds have different type based on categories. There is also mutual funds classification based on where they invest

Types of mutual funds based on where they investments

  • Money market funds

    • Money market funds invest in money market instruments where there are fixed income securities with a very short time to maturity and high credit quality.
  • Bond funds

    • Bond funds invest in fixed income or debt securities.
  • Stock or Equity funds

    • Stock or equity funds invest in stocks.
  • Hybrid funds

    • Hybrid funds invest in bonds, stocks or convertible securities
  • Other funds

    • Funds may invest in commodities or other investments.

Expenses in Mutual Funds

There is different expensed in mutual funds. Highlighting few expenses

  • Management fee
  • Distribution charges
  • Securities transaction fees incurred by the fund
  • Shareholder transaction fees
  • Fund services charges
  • Expense ratio
  • No-load fund

 

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