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Questions and Answers About Mutual Funds

Author: M.L.Williams Total views: 5 Word Count: 541

There are many frequent questions that are common about mutual funds. This is probably because mutual funds are so popular these days that many people are already investing in funds or are at least thinking about it. Below are some questions and answers:

How Long Have Mutual Funds Been Around?

The very first mutual fund was formed in the Netherlands in the early 1800s. Back then, a mutual fund was known as an investment trust. The first mutual fund formed in the U.S. was the New York Stock Trust in 1889. Because at that time Boston was considered by many to be the financial center of our nation until the turn of the century, a majority of funds started there: Fidelity, Pioneer, and Putnum Fund, to name a few. In 1928 the Wellington Fund was established and was made up of both stocks and bonds.

Are IRAs the Same as Mutual Funds?

In 1975, a provision was added to the Internal Revenue Code that allowed individuals already in a corporate pension fund to contribute up to $2,000 per year to a Individual Retirement Account. This was by far and away the largest contributing factor contributing to the growth of mutual funds over the last 33 years.

Top Mutual Fund Questions Of 2008 - What Is A No-Load Fund?

This type of fund is offered by an open-ended investment company that imposes no sales charge (load) on its shareholders. Investors buy shares in no-load funds directly from the fund companies, rather than through a broker, as is done in load funds.

What Exactly is a Mutual Fund?

A mutual fund is a group of stocks or bonds that are bought together - individual investors buy shares in the fund instead of the individual securities. You become a shareholder of the mutual fund instead of the individual stocks when you buy shares of a mutual fund.

What Is An Index Fund?

This type of fund tracks one of the stock market indexes, whether it is the Standard & Poor's 500 Stock Index, the entire stock market index, or some other performance measure of a like group of stocks. Most investors are probably best off in the long run buying an Index Fund.

Top Mutual Fund Questions Of 2008 - What Is Net Asset Value?

For most of the funds, the NAV is determined daily, after the close of trading on some specified financial exchange, but some funds update their NAV multiple times during the trading day. Net Asset Value (NAV) is the value of a share in a mutual fund and is calculated by dividing the total value of the fund, less the fund's liabilities, by the number of shares currently issued and outstanding.

Top Mutual Fund Questions Of 2008 - What Is A Public Offering Price?

Open-end funds sell shares at the POP and redeem shares at the NAV, and so process orders only after the NAV is determined. Closed-end funds may trade at a higher or lower price than their NAV; this is known as a premium or discount, respectively. If a fund is divided into multiple classes of shares, each class will typically have its own NAV, reflecting differences in fees and expenses paid by different classes. A Public Offering Price (POP) is nothing more than the net asset value plus a sales commission.

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