Mutual Funds are registered as investment companies. Investment companies sell shares in their company to investors and pool investor assets together which are invested in a portfolio of securities of publicly traded companies. The investment company manages the mutual fund assets according to a prospectus which discloses the investment objectives of the fund. An annual report is distributed to shareholders of the mutual fund to disclose the portfolio holdings, performance, distributions and expenses.
Mutual funds provide numerous benefits to investors including:
- Professional Management;
- Economies of Scale;
- Liquidity;
- Diversification;
- Transparency; and
- Divisibility.
The mutual fund shareholders pay the investment company quarterly fees based on an annual percentage of the mutual fund quarterly account balance. The mutual fund fees deducted from the account are related to:
- Asset Management Fees;
- Operating Costs;
- 12(b)1 Fees;
- Sales Commissions;
Investment companies pool assets which they manage professionally for a fee plus additional costs including, commissions depending on how the funds are marketed. Professionally managed “pooled” funds that are available to investors include:
- Open-End Funds;
- Closed-End Funds;
- Unit Investment Trusts.
A financial advisor can review your current mutual fund holdings and determine the appropriate mix of mutual funds based on an investment policy statement designed to reach your True North.
