A mutual fund is a professionally-managed form of collective investments that pools money from many
investors and invests it in stocks, bonds, short-term
money market instruments, and/or other securities.[1]
In a mutual fund, the fund manager, who is also known
as the portfolio manager, trades the fund's underlying
securities, realizing capital gains or losses, and collects
the dividend or interest income. The investment proceeds
are then passed along to the individual investors. The
value of a share of the mutual fund, known as the net
asset value per share (NAV), is calculated daily based
on the total value of the fund divided by the number of
shares currently issued and outstanding.
Legally known as an "open-end company"
under the Investment Company Act of 1940
(the primary regulatory statute governing
investment companies), a mutual fund is one
of three basic types of investment companies available
in the United States.[2] Outside of the United States
(with the exception of Canada, which follows the U.S.
model), mutual fund may be used as a generic term for
various types of collective investment vehicle. In the
United Kingdom and western Europe (including offshore
jurisdictions), other forms of collective investment
vehicle are prevalent, including unit trusts, open-ended
investment companies (OEICs), SICAVs and unitized insurance
funds. In Australia and New Zealand the term "mutual fund"
is generally not used; the name "managed fund" is used
instead.