REGISTERED INVESTMENT COMPANY

A mutual fund is an open-end registered investment company (RIC) registered under the Investment Company Act of 1940.

A Mutual Fund

  • Holds securities of other companies for the purpose of investing

  • Invests money on the behalf of shareholders who share in the profits and losses of the investment company

In many ways, a mutual fund operates like a publicly traded company.
  • Receives fees for providing a service, i.e. managing assets

  • Has expenses related to the operations of the fund

  • Produces financial statements which are audited annually

  • Investors own a pro-rata share of the company and receive earnings from the company in the form of distributions

A mutual fund is also different than a public company.
  • Shares are not traded. An unlimited number of shares are issued and redeemed at the current net asset value (NAV)

  • The mutual fund pays no taxes assuming it meets certain requirements and distributes its income