Mutual Funds

value fund.

A fund that invests in stocks that tend to be undervalued or overlooked is called a

Mutual fund

A pool of shareholders' money invested by professional managers in an assortment of different securities

Bond fund

A pool of shareholders' money invested in bonds

Balanced fund

A pool of shareholders' money invested in both stocks and bonds; also called a hybrid fund

Money market fund

A pool of shareholders' money invested in securities that earn relatively higher rates of return over the short-term; also called a money fund

Exchange-traded fund

A security that represents a "basket" of stocks like a mutual fund, but trades like an individual stock (Spiders and Cubes)

Index fund

A stock portfolio that copies the performance of a particular stock market index, such as the S&P 500 or the Nasdaq 100

Passive management

A style of mutual fund management that does not attempt to "beat the market"; the buy-and-hold approach

Active management

A style of mutual fund management that involves hands-on research and high volumes of trading

Prospectus

Document containing all vital information about a mutual fund

Closed-end mutual fund

Fund with a set number of shares to be issued, determined before the fund is ever established

Open-end mutual fund

Fund with no limit on the number of shares it can issue or the amount of money it can hold

Fund manager

Professional who makes investment decisions for a mutual fund

Diversification

Spreading out your investment dollars among a number of different securities

Liquidity

The ability to easily convert your investment back into cash

Net asset value

The total value of a fund's investment portfolio, minus its liabilities, divided by the number of its outstanding shares