Mutual fund

An open-ended pooled fund that transacts directly with its holders: money in creates new units and a redemption cancels them, at one price struck after the market closes each day.

Example

An instruction given at 11:00 to invest 10,000 is filled at the value struck after that day's close, so the buyer commits to the amount without seeing the price.

Important

You are always filled, and never at a price you saw first. That is the exact reverse of an exchange-traded fund, and neither arrangement is better - they trade certainty of fill against certainty of price.

Related terms

• Exchange-traded fund — A pooled fund whose units are listed and traded on an exchange throughout the session, at whatever price buyers and sellers agree rather than at the fund's own valuation.
• Net asset value — The stated value of a fund's holdings less its liabilities, usually expressed per unit. In illiquid vehicles it is produced by a valuation process rather than by trading.
• Share class — One of several versions of the same fund portfolio, differing in fee, minimum investment, currency or whether income is paid out or retained.
• Redemption — Withdrawing money from a fund by selling units back to the vehicle itself, rather than to another investor.

Lessons that explain it

• A fund is a wrapper, not an asset class of its own — Buying a fund buys a proportional claim on whatever it holds. Until you have opened the holdings list, the name on the ticket tells you almost nothing about what you own. (9 min)

All 578 terms in the Investing glossary