mutual fund

In the US, a collective investment scheme, operated by an investment company, which enables small private investors to invest in a diversified portfolio of shares, bonds and other securities.

It is known as an open end fund since there is no fixed amount of capital in the fund. If new investors want to invest in the fund, it can issue new units and accept their money into the pool. If they want to turn their investment back into cash, it can cancel their units. The number of units in the fund, and the amount of money invested, goes up and down according to supply and demand.

Funds are managed by professional fund managers who invest in securities to achieve the trust's objectives such as capital growth, income or a combination of both. Shares purchased from brokers are called load funds and those purchased direct from the fund company are called no load funds. Shares when sold are redeemed at their net asset value. There is a wide range of funds with a variety of objectives available in which to invest including capital growth and income. Similar to a unit trust in the UK.