mutual fund


Definition of mutual fund

: an open-end investment company that invests money of its shareholders in a usually diversified group of securities of other corporations

Examples of mutual fund in a Sentence

She invested her money in a mutual fund.

Recent Examples on the Web

The service gained momentum by offering an array of services, including mutual funds, movie tickets and airline bookings. Saritha Rai,, "The $10-billion surprise hiding inside Walmart’s acquisition of Flipkart," 10 July 2019 Recently, money market mutual fund sweep accounts seem to be either disappearing or increasing in cost (total operating expenses), resulting in lower yields for customers. Julie Jason, The Mercury News, "Julie Jason: Is sweep account relationship no longer mutual?," 9 Sep. 2019 In recent months, an American Funds mutual fund has become the largest single owner of Smith & Wesson corporate parent American Outdoor Brands. Stephen Gandel, CBS News, "This mutual fund is now the largest owner of one of largest gun companies in U.S.," 7 Aug. 2019 The mutual fund and financial services giant, which operates the building under a long-term lease with the Massachusetts Port Authority, would remain the sole office tenant. Tim Logan,, "City planners approve BU’s wild-looking data sciences building," 12 July 2019 The rising popularity of index and mutual funds makes stock market investing easier and safer, since risk is spread across many securities. Allison Schrager, Quartz, "Americans own more stock than ever—how will it change the economy?," 5 Sep. 2019 What’s more, as investors anticipate the inevitable end of the current bull market, institutional players like mutual funds and hedge funds have concentrated their money in the companies that seem like the safest bets for earnings growth. Ryan Derousseau, Fortune, "4 Fast-Growing Companies for Investors Hunting for Bargains," 15 Aug. 2019 Our customers can compare the performance of various mutual funds, on our platform. Niharika Sharma, Quartz India, "Paytm Money is eyeing even less-savvy Indian investors with Rs100 mutual fund plans," 6 Aug. 2019 Liston reported having significant investments, including in 25 different mutual funds, a money market account, and in U.S. treasury bonds., "Sorting out Ohio hemp and marijuana laws: Capitol Letter," 19 Aug. 2019

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'mutual fund.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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First Known Use of mutual fund

1932, in the meaning defined above

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Last Updated

12 Oct 2019

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The first known use of mutual fund was in 1932

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More Definitions for mutual fund

mutual fund


Financial Definition of mutual fund

What It Is

Mutual funds are open-ended investment companies that pool investors' money into a fund operated by a portfolio manager. This manager then turns around and invests this large pool of shareholder money in a portfolio of various assets, or combinations of assets.

How It Works

Mutual funds may include investments in stocks, bonds, options, futures, currencies, treasuries and money market securities. Depending on the stated objective of the fund, each will vary in regard to content and risk.

Funds issue and redeem shares on demand at the fund's NAV, or net asset value. Mutual fund management fees typically range between 0.5% and 2% of assets per year, but 12b-1 fees, exchange fees and other administrative charges also apply.

There are several different types of mutual funds you should be aware of:

Closed-End Mutual Funds: Closed-end mutual funds issue a fixed number of shares to the investing public and usually trade on the major exchanges just like corporate stocks. Closed-end funds often invest in a particular sector, a specific industry, or a certain country.

Open-End Mutual Funds: Open-end mutual funds stand ready to issue and redeem shares on a continuous basis. Shareholders buy the shares at net asset value (NAV) and can redeem them at the current market price.

Load Funds: The term "load" refers to the sales charge paid by an investor who purchases shares in a mutual fund. When the sales charge is imposed at the time of purchase, this is known as a front-end load. Conversely, back-end loads represent charges that are assessed when the investor eventually sells the fund.

No Load Funds: A No Load Fund is sold without a sales charge.

Additionally, a given mutual fund will issue different classes of its shares to investors.  The most common variations of share classes for load mutual funds are front-load A shares, back-end load B shares, and level-load C shares.

Class A Shares A mutual fund's A Shares charge a front-end load at the time of purchase. This is a sales fee that is charged as a percentage of the total investment and is used to compensate the financial representative who sells the fund. The amount of the front-end load is subtracted from the original investment. For example: If an investor places $10,000 in a mutual fund with a front-end load of 2%, then the total sales charge would be $200. The remaining $9,800 will go toward the purchase of shares in the fund. A shares may also impose an asset-based sales charge. Investors do not pay these charges directly. Instead, they are taken from the fund's assets. The fund then uses these fees to market and distribute its shares. The 12b-1 fee, which can equal a maximum of 0.25% per year, is an example of an asset-based sales charge.

Class B Shares: B Shares charge back-end loads. When an investor purchases the B shares of a mutual fund, the sales charge is deferred until the fund is sold. This deferred load usually decreases each year. B shares typically charge a higher asset-based sales charge than Class A Shares. For example: The B shares of a mutual fund may carry a 5% load if shares are sold within the first year. This back-end load of 5%, however, could be reduced by 1 % every year, until it is eliminated in the 5th year. Some B shares automatically convert to A shares after a specified period of time, which reduces the 12b-1 fees.

Class C Shares: Class C shares typically do not impose a front-end load, but will often charge a nominal fee if the shares are sold within one year. Class C shares often impose a high asset-based sales charge, but will not convert to A shares when the load reverts to zero.

Why It Matters

It is an important for an investor to consider mutual funds among their investment opportunities.  Just as with any investment, the pros and cons must be compared.

Advantages of investing in mutual funds include:

Professional management
Investment diversification
Explicit investment goals
Simple reinvestment programs


Many funds charge hefty fees, leading to lower overall returns.
Over time, statistics have shown that most actively managed funds tend to underperform their benchmark averages.
Mutual funds cannot be bought or sold during regular trading hours, but instead are priced just once per day.

Source: Investing Answers

mutual fund


English Language Learners Definition of mutual fund

US : a type of investment in which the money of many people is used to buy stock from many different companies

mutual fund

Legal Definition of mutual fund

see fund sense 2

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