Mutual funds have derived a lot of definitions from different sources. All the same, they can be defined as collective investments that bring together money from many different investors into a common pool which is then professionally managed. The money is then invested in other types of securities and they attract interests which are then divided among the stakeholders. The investments come in many different types which include cash instruments, stocks, bonds and money market funds.
Mutual funds come in many different types according to the type of risk they carry, that is either high or low risk, the length of time they take to mature, the type of insurer and also depending on whether they are local or foreign. All these sub-categories are key in determining the amount of return or interest that they attract and also the regulatory terms they are subject to as far as taxes and accounting are concerned.
These investments also incur expenses because the manager has to be paid handling charges. These are basically the management fees. On the other hand there are non-management fees which include a number of other things. Back to the management fees, there are administrative charges, advisory charges and contractual charges that are all payable regardless of the type of investment one has. The non management fees are on the other hand are not related to the management of the mutual funds but they all go towards making your investment worthwhile.
They include transfer agent expenses, custodian expense, registration expense, board of directors or trustees expense, accounting and auditing fees as well as printing and postage fee for processing the reports for investors. There are also the investor fees and expenses which are incurred if an investor chooses to invest through a broker. These will entail even the brokerage commissions.
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