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Economic Definition of mutual fund. Defined.

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Term mutual fund Definition: A company that pools the funds of hundreds or thousands of individuals to purchase corporate stocks, bonds, or other financial assets. The objectives of pooling funds is to reduce transactions costs and provide professional management not otherwise available. The most common types of mutual funds are "open-ended," so called because there are no limits on the number of shares issued. Others are "close-ended" because they issue a fixed number of shares that are then traded around. Mutual funds give consumers the chance to get higher interest rates or returns on the financial investment than available through banks. They also provide the opportunity to participant in financial markets that are typically closed to smaller investors.

Another definition: As one of ways of managing the money, a mutual fund has become extremely popular over the last 20 years. It originated from England in 19th century and developed in American after World War II. In China, the mutual fund appeared after 90`s. Do you know what the mutual fund is? A mutual fund is a company that pools the money of many investors to invest in a variety of different securities such as stocks, bonds, money market instruments other mutual funds, other securities and/or similar assets. It is operated by a fund manager, who invests the fund`s capital according to a stated set of objectives and tries to produce capital gains and income for the fund`s investors. Most mutual fund companies pay distributions once or twice a year. A board of directors or trustees supervises investment advisers and other service organizations and vendors to ensure the fund is felicitously used and investors can gain all the best interests. At the fundamental level, there are three varieties of mutual funds: stocks, bonds and money market funds. All mutual funds are variations of these three asset classes. People can either buy them directly from the fund company or through a third party.


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