Frequently Asked Mutual Fund Questions
M. L. Williams
Mutual funds are so popular nowadays that there are actually more mutual funds available than there are stocks of individual companies. Below we present some of the most popular questions about mutual funds along with some short answers to the questions.
How Long Have Mutual Funds Been Around?
Mutual funds actually go all the way back to the Netherlands in the early 1800s. Mutual funds were then called an investment trust (which most still are today). Mutual funds came to America in 1889 with the New York Stock Trust. Many mutual funds in America were started in Boston, which was a financial center of some renown back in the 1800s.
How Do IRAs Relate to Mutual Funds?
Many retirement accounts use mutual funds as their primary investment vehicle. IRAs were authorized in the United States in 1975 - IRA stands for Individual retirement Account. IRAs have led to explosive growth in mutual fund investing.
Top Mutual Fund Questions Of 2008 - What Is A No-Load Fund?
No load funds are mutual funds that don't impose a sales fee on the investor when they buy or sell the fund. A sales fee that is charged by the mutual fund company is called a "load".
What Makes a Mutual Fund?
Mutual Funds are pooled investment trusts - the fund buys shares of stocks and you as the individual investor buy shares of the fund instead of the individual stocks.
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.
What Is Net Asset Value?
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. 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.
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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