What are Mutual funds?
A: A mutual fund is a professionally managed investment fund that pools
money from many investors to purchase securities.
Mutual funds are often classified by what?
A: By their principal investments: money market funds, bond or fixed income
funds, stock or equity funds, or hybrid funds.
Funds may also be categorized as index funds, which are
what?
A: Passively managed funds that track the performance of an index, such as a
stock market index or bond market index, or actively managed funds.
Primary structures of mutual funds are what?
A: Open-end funds, closed-end funds, unit investment trusts.
Open-end funds are purchased from or sold to the issuer
at the net asset value of each share as of what?
A: The close of the trading day in which the order was placed, as long as
the order was placed within a specified period before the close of trading.
Mutual funds have advantages and disadvantages compared
to what?
A: Direct investing in individual securities.
What are the advantages of mutual funds?
A: Economies of scale, diversification, liquidity, and professional
management.
However, these come with what?
A: Mutual fund fees and expenses.
Mutual funds are regulated by what?
A: Governmental bodies and are required to publish information including
performance, comparison of performance to benchmarks, fees charged, and
securities held.
A single mutual fund may have several share classes by
which larger investors pay what?
A: Lower fees.
At the end of 2020, open-end mutual fund assets
worldwide were worth how much?
A: $63.1 trillion.
At the end of 2019, what percentage of household
financial assets were invested in mutual funds?
A: 23%.
Mutual funds accounted for approximately what
percentage of the assets in individual retirement accounts, 401(k)s and
other similar retirement plans?
A: 50%.
Where were the first modern investment funds, the
precursor of mutual funds, established?
A: In the Dutch Republic.
In response to the Crisis of 1772, Amsterdam-based
businessman Abraham formed what?
A: A trust named Eendragt Maakt Magt ("unity creates strength").
His aim was to provide small investors with what?
A: An opportunity to diversify.
When were mutual funds introduced to the United States?
A: In the 1890s.
Early U.S. funds were generally closed-end funds with a
fixed number of shares that often traded at prices above what?
A: The portfolio net asset value.
When was the first open-end mutual fund with redeemable
shares was established?
A: On March 21, 1924, as the Massachusetts Investors Trust.
Throughout the 1920s, in the United States, closed-end
funds remained more popular than what?
A: Open-end funds.
In 1929, open-end funds accounted for what percentage
of the industry's $27 billion in total assets?
A: Only 5%.
After the Wall Street Crash of 1929, the United States
Congress passed a series of acts regulating what?
A: The securities markets in general and mutual funds in particular.
The Securities Act of 1933 requires that all
investments sold to the public, including mutual funds, be what?
A: Registered with the SEC and that they provide prospective investors with
a prospectus that discloses essential facts about the investment.
The Securities Exchange Act of
1934 requires that
issuers of securities, including mutual funds do what?
A: Report regularly to their investors.
This act also created what?
A: The Securities and Exchange Commission, which is the principal regulator
of mutual funds.
The Revenue Act of 1936 established guidelines for
what?
A: The taxation of mutual funds.
It allowed mutual funds to be treated as a flow-through
or pass-through entity, where income is what?
A: Passed through to investors who are responsible for the tax on that
income.
Growth in the U.S. mutual fund industry remained
limited until the 1950s when what happened?
A: When confidence in the stock market returned.
In the 1960s, who began marketing mutual funds to the
public, rather than only wealthier individuals or those working in the
finance industry?
A: Fidelity Investments.
The introduction of money market funds in the
high-interest rate environment of the late 1970s did what?
A: Boosted industry growth dramatically.
The first retail index fund, First Index Investment
Trust, was formed in 1976 by whom?
A: The Vanguard Group, headed by John Bogle; it is now called the "Vanguard
500 Index Fund" and is one of the largest mutual funds.