This research examines the mutual funds segment of the investment market. Mutual funds are defined, and a brief history of mutual funds is presented. The entry of commercial banking institutions into the mutual funds market is reviewed, and the new competitive structure of the mutual funds market is described. Factors affecting the functioning of the mutual funds market are discussed, and projected changes in the market are reviewed.
Mutual Funds: Definition, Purpose, and Types
A mutual fund is a particular type of investment company. Specifically, a mutual fund is an open end investment company. An open end investment company is one that does not have a fixed amount of capital stock, and continues to sell additional shares to the public as demand warrants. As an open end investment company, a mutual fund also repurchases the outstanding shares in the fund when such shares are surrendered by shareholders. The term mutual indicates that the investment company represents a mutual pooling of the investment funds of a large number of people who share in the outcome of the combined investment of those funds. The value of a share in a mutual fund is determined by the market value of the investment holdings of the mutual fund.
A closed end investment trust is a company that sells a specified number of shares in the company to individual investors. The closed end investment trust company is not obligated to issue additional shares to other individuals who may desire to invest in the company, nor is the closed end investment trust company obligated by repurchase outstanding shares should individual investors desire to surrender their investment interests in the company. The shares in closed end investment trust companies are traded in the same manner as are the equity shares in a publicly held corporation. Thus, the value of the shares in a closed end investment company is determined by the functioning of the securities ...