Mutual fund is
a form of collective investment scheme that is professionally
managed by a fund manager, or also known as portfolio manager or
investment manager. In stock mutual fund, equities or stocks are
invested instead of bonds and money market instruments.
Meanwhile, the definition of collective investment scheme may
vary in every country although it is often referred to as funds,
managed funds and mutual funds. In the US, mutual fund can have
In the United
States, the term mutual fund refers to an organization that
pools money from different investors and use them for investment
in various types of financial instruments. Management of
investment decision is usually handled by the investment manager
while the transactions of funds such as unit pricing, valuation
and reconciliation are managed by the fund administrator.
stock refers to ownership of corporation. Hence, one who has
shares of stocks has ownership of a certain corporation that
issues that stock. Typically, stock takes in the form of common
stock shares although preferred stocks can also be issued by a
corporation. A common stock can entitle the shareholder for a
voting right. However, preferred stock shareholders can receive
dividend payments before other shareholders.
is a popular kind of stock that is offered in the market by a
public corporation although there are institutions that can
offer preferred stock and other forms of stocks to the public.
Stocks can be of different characters. It has been known that
all equity shares are not alike in each corporation.
outperformed other financial instruments in the marketplace.
When stocks perform well in the market, stock mutual funds can
follow suit. Nevertheless, the performance
of stock mutual funds in the stock exchange may have variations
for they are not all alike.
funds, also called equity funds, are a kind of mutual funds that
can have more risks than other types of mutual funds. These are
funds that are held either in cash or stock. The objective of
stock fund is to accrue capital appreciation through long-term
growth. This is in the case of growth fund, a type of stock fund
that invests in companies that experience significant revenue
there are other types of stock funds that invest in other forms
of stocks in the market place. Value fund is a contrast to
growth fund. While growth fund prefer companies that focus on
significant earnings and use their earnings for reinvestment
instead for paying dividend to shareholders, value fund invests
in companies that have reached maturity stage. Investors that
invest in value stock can earn from dividends received. It is
also likely that they can gain from the capital appreciation of
their assets once the corporation that issues the value stock
has experienced another growth in the marketplace and its stocks
are again popular to investors and stockholders.
A fund that
invests in both growth stock and value stock is a blend fund.
Investors can have both advantage features of two kinds of
stocks from one fund. Nevertheless, the risks that can come with
this fund cannot be adequately assessed. It is more likely less
risky than growth fund and more risky than funds invested in
of stock mutual fund is the sector fund. This fund invests in
one industry sector. For it to be called a sector fund, it
should invest at least a quarter of its assets value in one
sector. Although this fund can offer capital gain potential when
assets are invested in one industry that can possibly do well in
the future, the risks that can come with it is also
Other types of
stock fund include focused funds, aggressive growth fund and
index fund. There are other types that invest in small cap, mid
cap and large cap corporations.