Mutual Funds

mutual fund

mutual fund, in finance, investment company or trust that has a very fluid capital stock. It is unique in that at any time it can sell or redeem any of its outstanding shares at net asset value (i.e., the price of a share equals total assets minus liabilities divided by the total number of shares). A mutual fund, also called an open-end investment company, owns the securities of several corporations and receives dividends on the shares that it holds. A closed-end investment company differs from an open-end company in that the number of shares is limited and the price of the shares may fluctuate above and below the net asset value. The earnings of a mutual fund are distributed to the holders of its shares. It is hoped that a loss on one holding will be made up by a gain on another. The holders of mutual-fund shares thus gain the advantage of diversification, which might ordinarily be beyond their means. Common mutual funds, which often provide skilled management for security holdings, include stock, bond, balanced, index, and money-market funds. Stock funds mainly invest in common shares, and bond funds in bonds; such funds may specialize in a particular category of stocks or bonds (such as Internet stocks or municipal bonds). A balanced fund might invest in preferred stocks and bonds in addition to common stocks. Index funds invest in a portfolio that mimics a given index, such as the stocks that make up the S&P 500. The forerunner of the modern mutual fund was established in Belgium in 1822, and the use of these closed-end investment companies soon spread to Great Britain and France. They became popular in the United States in the 1920s, but from the 1930s the open-end mutual fund became more popular. Mutual funds experienced a period of tremendous growth after World War II, especially in the 1980s and 90s.

See M. Useem, Investor Capitalism: How Money Managers Are Changing the Face of Corporate America (1996).

The Columbia Encyclopedia, 6th ed. Copyright© 2014, The Columbia University Press.

Selected full-text books and articles on this topic

The Rise of Mutual Funds: An Insider's View
Matthew P. Fink.
Oxford University Press, 2008
Chuck Jaffe's Lifetime Guide to Mutual Funds: An Owner's Manual
Charles A. Jaffe.
Perseus Publishing, 2000
Scientific Investment Analysis
Austin Murphy.
Quorum Books, 2000 (2nd edition)
Librarian’s tip: "General Characteristics of Mutual Funds" p. 304
Corporate Responsibility and Financial Performance: The Paradox of Social Cost
Moses L. Pava; Joshua Krausz.
Quorum Books, 1995
Librarian’s tip: "Social Responsibility Screens Used by Nine Mutual Funds" begins on p. 26
Strong Managers, Weak Owners: The Political Roots of American Corporate Finance
Mark J. Roe.
Princeton University Press, 1994
Librarian’s tip: Chap. 8 "Mutual Funds"
Mutual Fund Performance during Up and Down Market Conditions
Rao, S. P. Umamaheswar.
Review of Business, Vol. 22, No. 1, Spring 2001
Peer-reviewed publications on Questia are publications containing articles which were subject to evaluation for accuracy and substance by professional peers of the article's author(s).
Common Sense on Mutual Funds: New Imperatives for the Intelligent Investor
John C. Bogle.
Wiley, 1999
Risk-Adjusted Performance of Mutual Funds
Simons, Katerina.
New England Economic Review, September-October 1998
A Taxing Problem
Fleming, Peter D.
Journal of Accountancy, Vol. 189, No. 5, May 2000
Mutual Fund Redemptions: A Guide to Helping Clients Minimize the Tax Bite
Knight, Lee G.; Knight, Ray A.
Journal of Accountancy, Vol. 195, No. 3, March 2003
Reshaping the American Financial System
Fortune, Peter.
New England Economic Review, July-August 1997
Asset Allocation and the Performance of Real Estate Mutual Funds
Gallo, John G.; Lockwood, Larry J.; Rutherford, Ronald C.
Real Estate Economics, Vol. 28, No. 1, Spring 2000
Peer-reviewed publications on Questia are publications containing articles which were subject to evaluation for accuracy and substance by professional peers of the article's author(s).
10 Commandments of Mutual Fund Investing
Thomas, Robert R.; Musar, Richard C.
Journal of Accountancy, Vol. 188, No. 2, August 1999
Mutual Fund Strategies: A New Century Demands a New Approach
Harrington, Cynthia.
Journal of Accountancy, Vol. 194, No. 2, August 2002
European Capital Markets with a Single Currency
Jean Dermine; Pierre Hillion.
Oxford University Press, 1999
Librarian’s tip: "Mutal Funds" begins on p. 269
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