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Archive-name: investment-faq/mutual-funds
Compiler: William Rini,
Posting-Frequency: monthly
Last-modified: 17-Nov-1998

V2.37 Frequently Asked Questions (FAQ) for

Frequently Asked Questions (FAQ) for is
copyright (c) 1997 by Bill Rini, and is protected by copyright as
a collective work and/or compilation, pursuant to U.S. copyright
laws, international conventions, and other copyright laws. Any
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Asked Questions (FAQ) for, including but
not limited to digests, summaries, books, mirror sites, or framed
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This question and answer list is given in the hope
that it is useful, but with no express or implied warranty for
accuracy, usefulness, up-to-date-ness, or anything else. Use the
information contained in this list at your own risk. Before investing in
any mutual fund, be sure to read the latest prospectus for the fund
in its entirety. This FAQ should NOT be used in place of competent
advice from investment, accounting and legal professionals. This FAQ
applies to mutual funds in the USA - most things are likely to differ

1: What is a mutual fund?
2: Why do people use mutual funds?
3: Are there any disadvantages to using a mutual fund?
4: What is a "closed-end fund" vs. an "open-end fund"?
5: What is "net asset value"?
6: A fund is "closed". Is that the same as a closed-end fund?
7: What expenses are there for a mutual fund?
8: What are typical expenses of a mutual fund?
9: Can mutual fund performance be guaranteed?
10: What is a "prospectus"?
11: What is a "statement of additional information"?
12: What is a "signature guarantee"?
13: What are "dividend distributions"?
14: What are "capital gain distributions"?
15: What else is there to know about distributions?
16: What is the difference between yield and return?
17: What do mutual funds invest in?
18: What is a "socially responsible" fund?
19: Where can I get comparative information on mutual funds?
20: How does buying funds directly compare with buying through a broker?
21: What does family of funds do compared to a single fund?
22: What are the tax implications of mutual funds for individuals?
23: What dates are important when investing in mutual funds?
24: How do I put mutual funds in an IRA?
25: What are the various forms of mutual fund account registration?
26: What resources are available on the Internet?
27: Are there any mutual funds that don't require a large purchase?
28: How accurate are the mutual fund prices in the newspaper?
29: Can mutual funds trade on margin?
30: Who is the typical fund owner?
31: How are mutual funds structured?
32: When should I sell a mutual fund?

1: What is a mutual fund?

A mutual fund, otherwise known as an investment company, is a corporation
which pools together investor's money generally to purchase stocks and bonds.
Investors participate in the mutual fund by purchasing shares of the entire pool
of assets, thus diversifying their investment. The pooled assets are invested by
professional managers who buy and sell securities on behalf of the investors.

Because mutual funds pass all gains, losses and tax obligations/benefits through
to investors, mutual funds receive preferential tax treatment under the U.S. Internal
Revenue Code.

2: Why do people use mutual funds?

Many people purchase mutual funds because they are a convenient and cost
effective method of obtaining diversification and professional management.
Because mutual funds hold anywhere from a few securities to several
thousand, risk is spread out over a number of investments. Additionally,
mutual funds generally buy and sell securities in volume, which allows
investors to benefit from lower trading, management and research costs.

Another advantage that mutual funds offer is that fund performance is subject
to frequent reviews by various publications and rating agencies, making it possible
for investors to conduct direct comparisons between funds.

3: Are there any disadvantages to using a mutual fund?

Although what one person may view as a disadvantage another may see as a desirable quality, below are some factors which may be disadvantages depending on your point of view:

(a) All mutual funds charge expenses. Whether they be marketing, management or brokerage fees fund expenses are generally passed back to the investors.

(b) Investors exercise no control over what securities the fund buys or sells.

(c) The buying and selling of securities within the mutual fund portfolio
generates capital gains and losses which are passed back to investors even
if they have not sold any of their mutual fund shares.

4: What is a "closed-end fund" vs. an "open-end fund"?

A closed-end fund has a fixed number of shares outstanding and is
traded just like other stocks on an exchange or over the counter.
The more common open-end funds sell and redeem shares at any time
directly to shareholders. Sales and redemption prices of open-end
funds are fixed by the sponsor based on the fund's net asset value;
closed-end funds may trade a discount (usually) or premium to
net asset value.

5: What is "net asset value"?

The net asset value (NAV) is the value of the fund's underlying
securities. It is calculated at the end of the trading day.
Any open-end fund buy or sell order received on that day is traded
based on the net asset value calculated at the end of the day.
A few funds calculate net asset value at more frequent intervals
and process trades at those values.

6: A fund is "closed". Is that the same as a closed-end fund?

No. Some open-end funds are closed to new investors because the
fund manager feels that it cannot be as effective with a very
large amount of money. This typically happens with funds that
invest in small companies. The open-end format remains the same,
but investments are not accepted from those who do not already
have accounts.

7: What expenses are there for a mutual fund?

(1) Closed-end funds charge annual expenses for research and
trading expenses. To buy and sell closed-end fund shares,
the investor must usually pay additional brokerage fees, unless
the investor finds someone to buy from or sell to directly.
(2) Open-end funds charge annual expenses for research and trading
expenses. In addition, they sometimes charge the following:
(a) A front end load or sales charge. These vary from 1% to
8.5% subtracted from the amount paid and are usually used
to pay commissions to brokers and financial advisors who
sell the funds. Very large investors can sometimes get
discounts on the front end loads. Currently, fund sponsors
determine loads, but the SEC is proposing a rule to allow
brokers and other salespeople to discount loads.
(b) A redemption fee, deferred sales charge, or back end load.
These work the same way as front end loads, but are charged
when you redeem shares. In many cases, they decline or
disappear after a long enough holding period.
(c) A Rule 12b-1 fee. Used to pay marketing expenses, which
means either commissions or advertising expenses. This is
a fee that adds to the annual expenses; it may be as large
as 1.25% per year. Declining back end loads are common
in funds with large 12b-1 fees.
A mutual fund that has neither (a) nor (b) is generally referred
to as a no-load fund. No-load funds are generally not sold
through brokers or financial advisors, but are sold directly to
investors. Many advertise in business and financial periodicals.
All of the above expenses for open-end funds are described on
the first or second page of the prospectus in a standardized
form. Brokerage fees paid by the fund in its trading activity
are _not_ normally included in such expense tables as they are
usually accounted for in the cost of securities bought.

8: What are typical expenses of a mutual fund?

Stock funds tend to be the most expensive, with annual expenses
ranging from 0.2% to 3.0% with most between 1.0% and 1.5%. Small
company and international funds tend to be more expensive. Bond
fund expenses range from 0.2% to 2.0%, with most around 1.0%. Money
market funds tend to be the least expensive, ranging from about
0.2% to 1.0%. See a later answer for a more detailed description
of these funds. Note that some funds, particularly money market
funds, waive expenses for a limited time to boost yield (and make
good ad copy). About one half of stock and bond funds have loads
(front or back end), but money market funds do not normally have
loads, though some have 12b-1 fees.

9: Can mutual fund performance be guaranteed?

No. As many funds state, past performance is no guarantee of
future results, and the fund shares are not backed or guaranteed
by the FDIC or other government agency. Note that while some
funds buy government backed securities, that is not the same as
backing the market value of the fund shares.

10: What is a "prospectus"?

It is a document which an open-end fund, or newly issued closed-end
fund, is required to provide to investors. Funds say that investors
should read it carefully before investing or sending money. A
prospectus contains descriptions of:
(1) fees, in a standardized format
(2) investment objective
(3) some financial data
(4) investment methods, risk description
(5) investment manager and compensation
(6) how to buy shares
(7) how to sell shares, including signature guarantee requirements
(8) dividend and capital gain distributions
(9) other services

11: What is a "statement of additional information"?

It is a document that is designed to be read along with the
prospectus; however, it is not required to be given to investors
before or after they invest (i.e. investors have to ask for it).
It contains information such as brokerage selection, description
of the fund's investment adviser, etc.

12: What is a "signature guarantee"?

It is a guarantee by a financial institution that your signature
is genuine and the financial institution accepts liability for any
forgery. It is typically required for large or unusual redemptions
of open-end mutual funds, though some funds require it for all
redemptions. At many funds, the guarantor must be a commercial
bank or NYSE member brokerage firm; some funds accept savings and
loan associations or credit unions (be careful, some savings and
loan associations have bank-like names).

13: What are "dividend distributions"?

A mutual fund may receive dividend or interest income from the
securities it owns; it is required to pay out this income to its
investors. Most open-end funds offer an option to purchase
additional shares with the distributions. Dividend distributions
are often made monthly or quarterly, though many funds make
distributions only yearly.

14: What are "capital gain distributions"?

A mutual fund may, in the process of trading, realize capital
gains. These must be distributed to investors. As with dividends,
there is usually the option to reinvest in additional fund shares.
Capital gain distributions generally occur late in the year, but
some funds make additional distributions at other times. Funds
with high turnover of securities often make significant capital
gain distributions every year, while funds with low turnover of
securities may accumulate unrealized gains for several years before
making a large capital gain distribution. Also, funds that are
increasing in size tend to make smaller capital gain distributions
because they buy more than they sell, while funds decreasing in size
tend to make larger capital gain distributions because they sell
more than they buy.

15: What else is there to know about distributions?

A distribution lowers the net asset value of the fund by the
amount of the distribution. The shareholder does not actually
lose money because of the distribution, since s/he gets cash or
additional shares to compensate for the lower net asset value.
Distributions have important tax consequences as detailed later.

16: What is the difference between yield and return?

Do not confuse the two terms.
Return is sometimes called total return. The formula for total return
(ignoring any taxes paid on gains and income during the holding period) is:
TR=((Ending Market Value)/(Beginning Market Value))-1

Yield is a very different number --- it is prospective
not retrospective. It is a measure of income not
capital gains. It is usually associated with debt not
equity. For instance, the yield quoted on a bond will almost never
be the same as the total return realized after the bond
matures or is sold.

17: What do mutual funds invest in?

Almost anything. There are funds that invest in almost anything
an investor could want to invest in. The most common types are
described below.
(1) Money market funds: these try to maintain a constant (usually
$1) NAV per share (though they cannot guarantee that), while
yielding dividends from their investments in short term debt
securities. They offer very low risk, but usually low long
term return. Most restrict investments to the top two (out
of four) Moody's and Standard and Poor ratings for short term
debt; some (including national government only funds) restrict
themselves to only the top rating, providing a bit of extra
credit safety, usually at a slightly lower yield. Most also
invest in repurchase agreements (repos) collateralized by short
term debt securities; these are subject to credit or fraud risk
of the other party in the repo (regardless of the credit risk
of the securities being repoed). Their market value is NOT
insured by the FDIC or other government agency. Enough defaults
in the fund's securities can cause it to be unable to maintain
its constant NAV.
(a) Regular funds: invest in short term debt of all types.
(b) Government funds: invest only in national government or
government agency debt or repos involving such debt.
Slightly lower credit risk than regular funds.
(c) Treasury funds: invest only in direct obligations of the
national government or repos involving these securities.
Lowest credit risk and dividend distributions are exempt
from state income taxes in most states.
(d) Municipal funds: invest only in debt of state or local
governments. For most individuals, dividend distributions
are exempt from national income taxes.
(e) Single state municipal funds: invest only in debt of
one state or its political subdivisions. For most individuals,
dividend distributions are exempt from national income
taxes and that state's income taxes. Note that a single
state fund is usually less diversified than a regular municipal
fund and might be considered riskier for this reason.
(2) Bond funds. These invest in longer term debt securities.
Thus the short term risk is greater than the infinitesimal
risk of the money market. But returns are usually higher.
Their NAVs may fluctuate due to both interest rate risk and
defaults. Unlike individual bonds, most bond funds do not
mature; they trade to maintain their stated future maturity.
The types of debt are similar to those of money funds (but
longer term); however, futures and options are sometimes used
for hedging purposes. The other classifications are described
Time to maturity, interest rate risk:
(a) Short term: usually less than 5 years maturity. Interest
rate risk is low.
(b) Long term: up to 30 year average maturity. Interest rate
risk is high.
(c) Mortgage backed securities: have some unusual interest rate risks.
When interest rates rise, they lose value like other bonds.
When interest rates fall, homebuyers refinance, causing them
to prepay old mortgages, which in turn causes bonds backed
by these mortgages to be called. In addition, when rates rise,
the MBSs extend due to slower prepayments --- thus
their duration goes up with interest rates and the bonds lose
money at an accelerating rate. When rates fall the prepayments
speed up and the bond gains money at an ever slower rate. This
property is called Negative Convexity. It is also a gross
over-simplification. There are MBSs with positive convexity.
A 14 year old 13% MBS's prepayments are functionally independent
of rate moves for example, also prepayment risk is shuffled all
over the place in CMOs.

The compensation paid to MBS holders for the negative convexity
is in higher yield. Basically the buyer of a mainstream MBS is
betting that rates will not change too much (that interest rate
volatility will be lower than the volatility implicit in the
price). Over time this is true. MBS indices have outperformed
Treasuries in all but a couple of the last 12 years.
(d) Adjustable rate: this type of fund is like other mortgage
backed funds, but it invests in adjustable rate mortgages.
Therefore, the two sided interest rate risk faced by fixed
rate mortgage backed bonds in considerably reduced. However,
the interest income will fluctuate widely, even though the
principal value is more stable. Since most adjustable rate
mortgages have caps on how high the rate can go (typical
limits are a 2% increase during a year and 6% increase during
the life of the loan), risk increases if interest rates
increase quickly or by a large amount.
(e) Target maturity: the few funds in this category buy only
bonds of the given maturity date. Thus one can actually
hold these to maturity.
Credit risk:
(a) Investment grade: restricted only to bonds with low to
medium-low credit risk (national government bonds are
usually considered lowest risk). This generally means the
fourth highest Standard and Poor's or Moody's rating
(S&P BBB or Moody's Baa). Some funds have higher standards.
(b) High yield or junk: buys bonds of any credit rating,
seeking maximum interest yield at a greater risk of default.
(3) Stock funds. These invest in common and/or preferred stocks.
Stocks usually have higher short term risk than bonds, but
have historically produced the best long term returns.
Stock funds often hold small amounts of money market investments
to meet redemptions; some hold larger amounts of money market
investments when they cannot find any stock worth investing in
or if they believe the market is about to head downward.
Some of the possible investment goals are described below.
They are not necessarily mutually exclusive.
(a) Growth. These funds seek maximum growth of earnings and
share price, with little regard for dividends. Usually
tend to be volatile.
(b) Aggressive growth. Similar to growth funds, but even more
aggressive; tend to be the most volatile.
(c) Equity income. These funds are more conservative and seek
maximum dividends.
(d) Growth and income. In between growth funds and income funds,
they seek both growth and a reasonable amount of income.
(e) Small company. Focuses on smaller companies. Usually of the
growth or aggressive growth variety, since smaller companies
usually don't pay much dividends.
(f) International. Focuses on stocks outside the USA, generally
investing in many nations' companies.
(g) Country or regional funds. These funds buy stocks primarily
in the designated country or region.
(h) Index funds. These funds do no management, but just buy some
index, like the Standard and Poor 500. Some index funds,
particularly those emulating indices with large numbers of
stocks such as the Wilshire 4500 or Russell 2000, emulate
the index by buying a subset with similar industry mix,
capitalization, price/earnings ratio, etc. Expenses are
usually very low.
(i) Sector funds. These funds buy stocks only in one industry.
Usually considered among the riskiest stock funds, though
different sectors tend to have different levels and types
of risk.
(4) Balanced funds. By mixing stocks and bonds (and sometimes other
types of assets) a balanced fund is likely to give a return
between the return of stocks and bonds, usually at a lower
risk than investing in either alone, since different types of
assets rise and fall at different times. An investor can create
his/her own balanced fund by buying shares of his/her favorite
stock fund(s) and his/her favorite bond fund(s) (and other funds,
if desired) in the desired allocation.
(a) Regular balanced funds: These funds usually hold a fixed
or rarely changed allocation between stocks and bonds.
(b) Asset allocation funds: These funds may switch to any
allocation, usually based on market timing to some degree.
(5) Multifunds. These funds buy primarily other mutual funds.
They choose other funds based on one or more of the investment
goals outlined above.
(a) No-management funds: These funds hold fixed proportions
of other funds. They are offered by fund companies as
cheap balanced funds -- the underlying funds are other
funds managed by the same company. There are generally
little or no expenses other than those of the underlying
(b) Managed funds: In these funds, a manager picks which other
funds s/he believes are managed well. Sometimes these
funds are market timing funds which prefer to leave the
stock picking to other managers. These funds have
expenses above and beyond those of the underlying funds.

18: What is a "socially responsible" fund?

In addition to the usual investment goals, these funds restrict
their investments to whatever they define as socially responsible.
Such criteria can include: avoiding military, alcohol, tobacco,
and gambling industries, preferring companies
that treat their employees and the environment well. Different
funds have different social and investment criteria.

19: Where can I get comparative information on mutual funds?

Brokers and financial advisors offer information, but they
usually give information only on load funds. However, many
periodicals have regular mutual fund review issues:
Barron's (quarterly)
Money Magazine (Nov.)
Business Week (Feb.)
Forbes (Sept.)
Fortune (fall)
Consumer Reports
Wall Street Journal
Investors Business Daily
Morningstar Mutual Fund Report
Value Line Mutual Fund Survey

In addition, there are many books available on
mutual fund investing. Different periodicals and books use
different criteria to rate funds. These periodicals and books
usually have phone numbers which you can call to get the fund's
prospectus and other information. Note that some ratings account
for loads, while others do not. Past performance is no guarantee
of future results of either the fund or the securities markets
in general.

20: How does buying funds directly compare with buying through a broker?

A load fund usually costs the same whether bought directly or
through a broker. A no-load fund can be bought directly at no
charge; most brokers will charge a commission to buy a no-load
fund. Some discount brokers now offer some no-load funds at no
transaction fees; normally, they receive a portion of the funds'
annual expenses instead. Holding funds in a broker may make it
easier to trade from one fund to another, however. Closed-end
funds usually need to be traded through a broker, like regular
stocks, though some have dividend reinvestment plans.

21: What does family of funds do compared to a single fund?

Families of funds sometimes offer additional services, such as
telephone switching from one fund to another within the family.
With load fund families, switching from one load fund to another
is sometimes allowed without paying a second load. Some families
may make bookkeeping easier by listing all of an investor's
different funds on one statement. Others reduce expenses by
sharing services which realize economies of scale. Note, however,
that the good advertised performance of one fund in a family
may or may not be shared by others.

22: What are the tax implications of mutual funds for individuals?

Like shares of any stock, selling mutual fund shares may cause you to
realize a capital gain or loss. Mutual funds also distribute dividends
received and their own realized capital gains, usually at the end
of the year; these distributions, whether taken in cash or reinvested,
are taxable (note that the nontaxability of municipal bond funds
applies only to dividend distributions; capital gain distributions
are always taxable). Thus it is often a bad idea to buy a mutual
fund just before the distribution date, since part of your investment
will be immediately returned to you as a taxable distribution, resulting
in you paying taxes much earlier than if you bought just after the
distribution. Although the distribution lowers the net asset value
of your shares, allowing you to "deduct" it when you sell the shares,
paying taxes sooner rather than later prevents you from gaining
investment income on the amount that is taxed. Note that reinvesting
is considered identical to taking the distribution in cash and
sending the same amount into the fund as a new investment, so don't
forget about it when calculating the basis in your account. When
selling, it is best to know the different methods of calculating
the basis of shares sold ahead of time, since some methods require
that you designate which shares are to be sold. For more information,
call 1-800-TAX-FORM and ask for publications 544, 550, and 564, and
schedules B and D, but note that tax rules can change since the last
tax year.

23: What dates are important when investing in mutual funds?

There are several important distribution related dates to be aware of
when buying and selling mutual fund shares.
* Declaration date:
This is the date on which the distribution is declared, followed by...
* Ex-dividend date:
This is the date the shares trade without the dividend.
* Record date:
Shareholders who own shares on this date will receive the
distribution on the ....
* Payment date:
This is the date on which the dividend is actually paid out.

24: How do I put mutual funds in an IRA?

Most funds have a bank or trust company arranged to be an IRA custodian
for any IRA shareholders. If you buy the fund directly, using this
custodian, you must use a different application available from the fund
company. The custodian usually charges $10 to $15 per fund account
per year. This is a significant expense for small accounts, not too
significant for larger accounts. Alternatively, you can open a
brokerage account IRA and purchase mutual funds within that. This
would be similar to using a broker to buy funds normally, but incurs
a single IRA custodian fee (usually $25 to $50). Custodian fees,
but not loads or commissions, may be paid separately from the
contribution, and may be separately tax deductible. Call 1-800-TAX-FORM
and ask for publication 590 and form 8606 for general IRS information
about IRAs (but note that tax rules can change since the last tax year).
Note that the tax issues of distributions as detailed previously don't
affect IRA accounts.

25: What are the various forms of mutual fund account registration?

The way in which your mutual fund account is registered is an important
factor in estate planning. The disposition of property or assets after
the death of an individual is often governed by the way that
property or account is titled. Listed below are descriptions
for three common forms of mutual fund account registration.

Sole Ownership:
Individual registration is the simplest form of ownership because
one person has absolute control of the property. Owner must plan for
transfer of the account when he/she dies; commonly done with a will.
Otherwise state rules of succession and state inheritance laws dictate
disposition of account upon death.

Joint Tenant:
Most common form of ownership involving 2 or more individuals. Each person
owns an individual interest in the entire account. Consequently, income
generated from the account is owned equally by all of the parties involved in
the joint tenancy. Right of survivorship dictates that upon the death of a
joint tenant, the account immediately and automatically passes to the
surviving owner(s). Joint tenants do not have to be related individuals.

Tenants In Common:
Differs from joint tenancy in several ways. Tenants in common each own a
specific portion of the account. If no specific allocation is made
(e.g. two-thirds/one-third or one-half/one-half), the account is said to be
equally divided among all of the tenants. Income earned on the account
is divided based upon the specific allocation of ownership. As in joint
tenancy, tenants in common do not have to be related individuals.

There are no survivorship rights for assets held in tenancy in common. Upon
the death of one of the tenants, the assets will pass to whomever the
decedent names in a will.

Community property is a specific form of registration that is only
available in certain states. The following states are community
property states:
Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas,
Washington and Wisconsin

According to Joseph Morlan:

"In property held jointly, the portion transferred on death (usually an
undivided half interest) is entitled to stepped up cost basis
regardless of how the title is held and regardless of community
property. The advantage of community property is that under code sec.
1014 (b)(6) the surviving spouse is ALSO entitled to a stepped-up
basis for his or her half interest if at least half of the community
property in question is includible in the decedent's gross estate for
estate tax purposes."

Get the final word on tax and estate implications regarding specific
forms of registration from a competent tax or legal professional.

26: What resources are available on the Internet?

Following is a list of some Internet resources available which relate
to mutual fund investing. If you are aware of resources which are not
listed, feel free to E-mail a description of them to the FAQ Compiler
identified at the beginning of this file.

100% No-Load Mutual Fund Council

A I M Management Group

A Mutual Fund Directory

Advisor Software, Inc.

Alger Funds

Alliance Capital

Altamira Investment Services, Inc.

American Funds

Ameristock Mutual Fund

Annual Reports Library

Atlantic Financial of Massachusetts

Benham Group

Cambrex Group

Cedar Group Director's Chair

Colonial Mutual Funds

Columbia Funds

Compass Capital Funds


Dynamic Mutual Funds

EagleWing Research

Federated Investors

Fidelity Investments


First American Strategy Fund



Fortitude Funds

Fountain Square Mutual Funds

Fund Counsel




Gabelli Funds

GIT Investment Funds

Goldman Sachs Funds

Guinness Flight Mutual Funds

IAI Mutual Funds

IBC Financial Data


Internet Closed-End Fund Investor


InvestSmart Stock Game

Ivy Mackenzie

Janus Funds

Jones & Babson Group

Kaminski Poland Fund

Kaufmann Mutual Funds


Liberty Financial Companies

Lord Abbett

Market Timer Report

Micropal Financial Data Centre


misc.invest.funds FAQ - Official version

Montgomery Funds

Mutual Fund Advisor

Mutual Fund Cafe

Mutual Fund Consistency Index Newsletter

Mutual Fund Edcuation Alliance

Mutual Fund FAQ


Mutual Fund Market Manager

Mutual Fund Market Timing

Mutual Fund Network

Mutual Funds Home Page

Mutual Funds Index

Mutual Funds OnLine

Mutual Funds Reporting

NestEgg Magazine

Neuberger&Berman Mutual Funds

New England Funds

New Providence Capital Management, L.L.C.

Newport Pacific Management

PAWWS Financial Network

Polynous Capital Management

Prime Times Investor

Prudent Bear Fund Homepage

Quicken Financial Network

Regent Fund Management

Rich's MONEYFLO Funds

Romanian American Forum

Sagit Investment Management Ltd. Mutual Funds

Scudder Funds

Seligman Mutual Funds

Stein Roe & Farnham Incorporated

Stock forecasts and mutual fund forecasts for investors

Strong Funds

STS Select Timing System

T. Rowe Price


Technical Analysis of Stocks and Commodities

Technical Tools

The Patient Investor

Thomson MarketEdge

Timothy Plan

Twentieth Century Mutual Funds

Value Line Mutual Fund Survey


Wall Street City

Warburg Pincus Funds

WWW Internet Fund

27: Are there any mutual funds that don't require a large purchase?

Contributed by David Snowball (

No-Load Equity or Balanced Funds with low purchase or low AIP,
based on Morningstar No-Load Funds through 6/96, updated as of


(Thanks to Barb Jensen, Tracy Monaghan and Ed Bernstein for passing
along corrections, leads and additions.)

Telephone numbers for fund companies are generally available in
Barron's, the Sunday New York Times and (I believe) the Wall Street
Journal. In addition, the on-line fund profiles through
Networth include addresses and phone numbers.

How to read it:

Fund Category
Fund Name, Signal of Morningstar 4- or 5-star Funds, Minimum
Investment and/or Min. w/Automatic Investment ($100A),
Miscellaneous Info

So, Bridgeway's minimum is $100 if you agree to invest a set amount
each month; that's the $100A. Its one-time investment minimum
($1000) is too high for this list, so it's not mentioned. If you go
down to the Growth Fund category, you'll see Berger 101: you can
start with a $500 one-time investment or a $50 investment if you're
willing to contribute monthly: $500/$50A.

Aggressive Growth Funds
Bridgeway Aggressive Gro., $100A - in less than 15 states
Dreyfus Aggressive Gro., $100A
Founders Special, $50A
Invesco Dynamics, ****, $50A
Strong Discovery, ****, $50A
Twentieth Century Ultra, ****, $50A
USAA Aggressive Growth, $50A
Value Line Growth Investors, $40A

Growth Funds
Amana Trust Growth, $100 (invests on Islamic principles)
Babson Growth, $500
Bayfunds Equity, $500
Beacon Hill Mutual Growth, $100
Berger One Hundred, ****, $500/$50A
Bramwell Growth, $50A
Capstone Growth, $200
Charter Cap Blue Chip, $50
Fairport Midwest Growth, ****, $250
Fidelity Retirement Growth, ****, $500
First Mutual Fund, $250
Founders Growth, *****, $50A
Key Funds SBSF Capital Growth, $500
Legg Mason Value, ****, $50A
Lindner Growth, ****, $100A
Marshall Mid-Cap Stock, $50A
Montag & Caldwell Growth, $50
Neuberger & Berman Focus, ****, $50A
Neuberger & Berman Partners, ****, $50A
Nicholas, ****, $500/$50A
Rockwood Growth, $100A
Safeco Growth, $100A
Safeco Northwest, $100A
Schroder U.S. Equity, $500
Scudder Value, ****, $50A
Seafirst Retirement Blue Chip, ****, $500
Stein Roe Young Investor, $100A
Strong Growth, $50A
Strong Opportunity, *****, $50A
Strong Schafer Value, ****, $50A
T. Rowe Price Blue Growth, $50A
T. Rowe Price Growth Stock, ****, $50A
T. Rowe Price Mid-Cap Growth, *****, $50A
T. Rowe Price New America Growth, ****, $50A
T. Rowe Price Spectrum Growth, ****, $50A
USAA Growth, ****, $50A
Value Line, ****, $40A
Westcore Midco Growth, $50A

Growth & Income or Equity Income Funds
Aetna Growth & Inc. Sel., $50A
Amana Income Fund, $100 (invests on Islamic precepts)
Berger Growth & Income, $500 (formerly Berger 101)
Chicago Trust Growth and Income, $50
Fairport Funds Growth & Income, $250
Key Funds SBSF, $500
Safeco Equity, $100A
Safeco Income, $100A
Strong Total Return, $250

Small Cap Funds
Berger Small Company Growth, $500/$50A
Bridgeway Ultra-Small Co., $100A - in 15 states
Fasciano, ****, $50A
Founders Discovery, ****, $50A
Founders Frontier, ****, $50A
Fremont U.S. Micro-cap, $50A
Heartland Small Cap Contrarian, $50A
Invesco Small Company, $50A
Neuberger & Berman Genesis, ****, $50A
Pathfinder Fund, no minimum/$25A - in about 40 states
20th Century Giftrust, *****, $500/$50A
T. Rowe Price New Horizons, ****, $50A - closed exc 401k/403b

Asset Allocation and Balanced Funds
Chicago Trust Asset Allocation, $50
Montag & Caldwell Balanced, $50
Pax World Fund, $250
Strong Asset Allocation, $250

International and Worldwide Funds
AARP Global Growth, $500
Artisan International, $50A
Babson-Stewart Ivory International, $100A
Capstone New Zealand, $200
Capstone Nikko Japan, $200
Founders Passport, $50A
Founders Worldwide, $50A
Invesco International Growth, $50A
Preferred International, $50A
Scudder Global, $50A
Scudder Global Discovery, $50A
Scudder International, $50A
Strong International, $50A
20th Century Int'l Equity, $50A

Specialty Funds
Capstone Medical Research, $200/$25A
Midas Fund, $500

Special Notes About Fund Families

GE and State Farm both sponsor low-minimum funds which are
restricted to their employees and retirees

Special Notes About Automatic Investing Plans

All T. Rowe Price funds have a $50/month AIP minimum

Special Notes About Individual Retirement Accounts

Hundreds of funds are available to IRA investors at low
minimums. Most IRAs charge a custodial fee: a flat amount
paid each year. That charge is either per investor or for
each fund you own. Most funds stop charging that fee when
your account reaches a certain threshold.

The list below gives you: family name, minimum to open an
IRA/minimum with an automatic investment plan if it's
different, charge per fund or per investor (SSN stands for
Social Security Number), maximum charge you can pay in a year,
and the point at which the charge is waived.

A few funds have exceptions to the rules. For example,
Fidelity does not waive fees for Magellan or Select Funds and
Twentieth Century has a $10,000 minimum for International
Emerging Growth.

AARP (through Scudder), $250 - no fee
Benham, $1000 - no fee
Fremont, $1000/0A - no fee
Harbor, $500 - no fee
Scudder, $500 - no fee
Stein Roe, $500 - no fee
USAA, $250 - no fee

Acorn, $200 - $5 one time fee plus $10/fund, no cap, no waiver
Babson, $250 - $10/SSN, no waiver
Dreyfus, $750/100A - $10/fund, $25 cap, $5000
Fidelity, $500 - $12/fund (waived for AIP), $60 cap, $2500
Founders, $500/50A - $10/SSN, $5000
Invesco, $250/50A - $10/SSN, no waiver
Janus, $500 - $12/fund, $24 cap, no waiver
Kaufmann Fund, $500 - $12/year, 0.2% redemption fee, $20,000
Lindner, $250 - $10/fund, no cap, no waiver
Loomis-Sayles, $250 - $10/fund, $30 cap, $25,000
Neuberger & Berman, $250/100A - $12/SSN, $10,000
Oakmark, $1000 - $5 one-time, $10/fund, no cap, no waiver
T. Rowe Price, $1000/50A - $10/fund, no cap, $5000
Royce, $500 - $12/SSN, no waiver
Safeco, $250/100A - $5/fund, no cap, waiver under discussion
Schwab, $500-1000 - $29/SSN, $10,000
Strong, $250/0A - $10/fund, $30 cap, $25,000
20th Century, no minimum - $10/fund, $30 cap, $10,000
Van Wagoner, $500 - $15/fund, no cap, no waiver
Vanguard, $1000 - $10/fund, no cap, $25,000
Warburg-Pincus, $500 - $10/SSN, no waiver

28: How accurate are the mutual fund prices in the newspaper?

According to the Investment Company Institute (ICI) fund pricing is almost
99.5% accurate. Lipper Analytical Services estimates the number to be closer
to 98.95%.

Mutual funds are required to submit to the NASD a daily pricing of the fund's NAV.
The NASD then distributes this information to the press and news/quote services.
Occasionally a fund may err in pricing the securities in the portfolio which results in
an inaccurate NAV being distributed to the press. Fortunately, even the rare mispricing
is usually detected and corrected prior to any processing of mutual fund buy and sell orders.

29: Can mutual funds trade on margin?

While some brokerage firm margin policies may allow for an investor to
borrow against their mutual fund positions, mutual funds themselves are
prohibited from trading on margin. Additionally, mutual funds are also
prohibited from selling short to participating in joint trading ventures.

Because funds are prohibited from thee more speculative trading practices,
investors often form limited partnerships and other legal entities to bypass
these rules.

30: Who is the typical fund owner?

According to several surveys by the Investment Company Institute (ICI) conducted over the last several years:

63% of investors own at least two mutual funds.
43% of investors own four or more funds.
The average mutual fund investor holds $18,000 in mutual funds.
The average median age is 44 with a median household income of $60,000.

Other interesting facts from the ICI surveys include:

73% of mutual fund investors own stock funds.
49% of mutual fund investors own bond funds.
52% of mutual fund investors own money market funds.
60% of mutual fund investors purchased their funds through a broker,
insurance agent, financial planner or bank rep.

31: How are mutual funds structured?

Mutual funds are in their most basic form corporations. Investors
are the shareholders in the company and the assets of the company are
the pooled investments of all the shareholders (investors). The board of
directors of a mutual fund act just as a board of directors for any company.
They are elected representatives of the investors, who owe shareholders
a fiduciary responsibility. The most important function of the board is
to select the fund's manager. The fund manager is in a way, the president
of the company/fund. The manager traditionally makes all the investment
decisions for the fund and supervises the day to day operations.

Managers are paid a management fee which is usually a percentage of
the assets under management. Managers may also have incentive clauses
in their contracts that reward superior performance. Because the manager
is paid a percentage of the assets s/he is responsible for, there is an incentive
to do well for investors in the hopes of attracting more investors and in
turn, more money to manage.

Typically, open ended funds retain the services of a underwriter to distribute
shares. The underwriter is a NASD licensed broker/dealer. This starts to get
a little complicated, but generally it works like this;

ABC Growth Fund's board of directors hires ABC Management to run the fund.
ABC Growth Fund's board also hires ABC Investments to act as the distributor.
ABC Management and ABC Investments are wholly owned by another company
(for this example ABC Inc.). While ABC Management, ABC Investments and
ABC Inc. may not own ABC Growth Fund, they would likely control many of
the seats of the board of directors. For instance, in the Janus Fund's prospectus
it states:

"Janus Investment Fund (the "Fund") is an open-ended management investment
company whose shares are currently offered to the public in eleven series
(individually a "Fund" and collectively "Funds"). Eaxh fyund is managed separately
by Janus Capital Corp. ("Janus Capital") and has its own objective and policies
designed to meet different goals. "

Now overlooking the fact that Janus has decided to aggregate each of the individual
funds into one investment company trust, you can see that Janus Investment Fund
has hired Janus Capital Corp. to manage each of the funds. Additionally, the
prospectus later states that the Janus Service Corp, a wholly owned subsidiary
of Janus Capital, is the subagent for the transfer agent and Janus Distributors Inc.,
another wholly owned subsidiary of Janus Capital, is the underwriter/distributor.

32:  When should I sell a mutual fund?

While one could never hope to cover every circumstance that would warrant
the sell of a mutual fund investment (or any investment for that matter),
here are some sound reasons for considering parting with a particular
mutual fund holding.

The fund's style has changed.  If you have invested in a large-cap growth
fund and fund has begun investing in smaller, riskier investments it might
be time to shed this fund.  This can also operate conversely.  If your
fund's objective is to invest in emerging growth and begins becoming heavy
with large and medium cap stocks, you might want to shift your money into a
fund that more closely fits your investment objective.

The fund consistently lags behind.  A single quarter or year does not a bad
fund make but if your fund has consistently lagged its peers, you may want
to cut this one loose.  Also, it's important to keep in mind that you have
to make a fair comparison.  Do not compare your utility fund against the
S&P500.  Compare it against similar funds with similar objectives.  If you
find that your fund has underperformed its peer group over 1, 3 and 5 years
it's probably time to move on.

Management has changed hands.  While this factor alone is not truely
justification for moving your assets, it should send up a red flag for you
to scrutinize performance more closely.  Most funds have plenty of able
managers ready to take the helm but you should be diligent in making sure
that your new manager stays competitive with his/her peers.

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Send corrections/additions to the FAQ Maintainer: (William Rini)

Last Update March 27 2014 @ 02:11 PM