Guide to Mutual Funds

Guide to Mutual Funds

Market Timing System

A mutual fund market-timing system is one in which an investor tries to take advantage of short-term market or sector movements by buying or selling focused mutual funds to profit from the difference in closing prices. This strategy is legal but unpopular with fund managers, as it requires them to keep a higher percentage of their portfolio in cash to meet sell orders.

New York Hedge Funds

A hedge fund, whether based in New York or elsewhere, is an investment portfolio open only to qualified investors (typically $1,000,000 in investable assets). Hedge funds are not subject to the same regulatory scrutiny of other public investment funds, and can thus invest in more complex and riskier strategies, including short-selling, derivatives trading, and other forms of leverage. These aggressive tactics can and have increased investment returns dramatically; however, a flat or downward trending market can cause severe losses.

Investing for Dummies

There are several criteria to establish before beginning an investment program. Some of the most important are as follows: Age, Income, Liquid Assets, and Risk Tolerance. From there, a new investor may lay the framework for a retirement, college-savings, wealth-accumulation, or estate-planning strategy.


A share is a unit of the company or fund in which an individual has invested money. In regard to mutual funds, each share class has different sales loads, 12b-1 fees, redemption fees, and contingent deferred sales charges. Decisions regarding in which share class to invest depend on an investor’s time horizon and total estimated investment.


A dividend is a distribution to the shareholders of a company or fund. It can be distributed as cash or stock. Typically dividends are paid either quarterly or monthly. The dividend payment divided by the share price is equal to current yield.

Blue Chip Stocks

A blue-chip stock is one considered to be of high quality and stability. For many years, a blue-chip was considered to be almost as safe as a bond, but volatility in the equity markets has diminished that perception.

Unclaimed Funds

Funds or properties become classified as “unclaimed” after there has been no activity for a period of time, and the manager or custodian is unable to reach the owner. For instance, a mutual fund in which there have been no additions or withdrawals for five years, and for which the statements are being returned as undeliverable, might be considered unclaimed funds.

Lost Money

Lost money is another term for unclaimed funds. Lost money could include investment portfolios, bank accounts, stock certificates, bonds, or any other liquid asset. Government entities, typically the states, must make certain efforts to locate the owners of these properties.

Mutual Fund Analysis

Mutual fund analysis consists of quantitative and qualitative evaluations. Quantitative factors include performance numbers, style consistency, and risk ratios. Qualitative factors are management experience and skill, and history and reputation of the mutual fund company. Any actively-managed mutual fund should score well on both quantitative and qualitative criteria to be considered for investment.

Money Market

A money market fund seeks to return a high level of current income, consistent with short-term market conditions. Investment goals are the preservation of capital (maintaining a $1/share value, known as “not breaking the buck”) and the ability to remain liquid. Money market funds invest in a variety of money market instruments including corporate debt obligations, U.S. Government securities, bank securities, certificates of deposit and repurchase agreements.