Meaning of mutual fund | Babel Free

Definitions

A form of collective investment in which money from many investors is pooled and invested in stocks, bonds, short-term money market instruments, or other securities under the direction of a fund manager.

Equivalents

Examples

“The work of the Laureates has affected not only academic research but also market practice. The fact that stock markets are very hard to predict in the short run, and that stock-picking is very difficult both in the short and the long run, has led to close examination of the performance by mutual funds. Research generally has failed to find that mutual funds generate positive returns above what can be motivated by the level of risk; once fund fees are taken into account, their asset management often yields negative excess returns. The recent growth of index funds, which collect all stocks in passively managed portfolios, follows that insight. Moreover, the few successful specialized funds we observe are often motivated by the new factors – “size” and “book-to-market” – that are included in the extended version of the CAPM.”

CEFR level