Mutual Fund
A pooled fund priced once daily at net asset value.
What is Mutual Fund?
A registered investment company that pools investor money into a managed portfolio. Shares are bought and sold directly with the fund at the day's closing NAV - no intraday trading. Funds must distribute realized capital gains to shareholders annually, which can create a tax bill even in a down year.
Mutual Fund: a worked example
An order entered at 11 a.m. fills at the 4 p.m. NAV, not at the price when it was placed.
What is the difference between Mutual Fund and Exchange-Traded Fund (ETF)?
Mutual fund = one price a day, trades with the fund, distributes capital gains. ETF = trades all day on an exchange, generally more tax-efficient.
Often confused with Exchange-Traded Fund (ETF) - see Mutual Fund vs Exchange-Traded Fund (ETF) side by side.
More terms in Securities & Instruments
Common Stock
An ownership share in a company, with voting rights and last claim on assets.
Preferred Stock
Equity with a fixed dividend and priority over common, usually without votes.
Bond
A loan to an issuer that pays interest and returns principal at maturity.
Coupon Rate
The bond's stated annual interest as a percentage of par.
Yield to Maturity (YTM)
The total annualized return if you buy today and hold to maturity.
Par Value (Face Value)
The principal repaid at maturity, conventionally $1,000 per bond.
Duration
A bond's price sensitivity to a 1% change in interest rates.
Credit Rating
An agency's assessment of an issuer's likelihood of default.