A 12b-1 fee goes toward paying for marketing, distribution and other expenses a mutual fund incurs. 

A 12b-1 fee is an annual marketing or distribution fee on a mutual fund. The presence of a 12b-1 fee frequently pushes the overall expense ratio on a fund to above 2%.
The Calamos Growth Fund is an example of a fund that carries a smaller 0.25% 12b-1 fee on its class A shares and charges the maximum 1% 12b-1 fee on its class C shares.
The distribution fee covers marketing and paying brokers who sell shares. Class B and class C shares of broker-sold funds typically have 12b-1 fees, but they may also be charged on no-load mutual fund shares and class A broker-sold shares. The 12b-1 fee can be broken down into two distinct charges: the distribution and marketing fee and the service fee. The distribution and marketing piece of the fee is capped at 0.75% annually, while the service fee portion of the fee can be up to 0.25%.

12B-1 Fee

The active share study refers to an academic study conducted by researchers from the Yale School of Management in 2006.

The active share study was an academic study conducted by researchers from the Yale School of Management in 2006. Funds with high active share and low tracking error are diversified stock pickers (e.g., T. Rowe Price Small Cap); low active share and high tracking error are factor bets (e.g., Investment Co. of America); high active share and high tracking error are concentrated stock pickers (e.g., Fidelity Low Price); low active share and low tracking error are closet indexers (e.g., Fidelity Magellan); and zero active-share and zero tracking error are pure index funds (e.g., Vanguard 500). Petajisto and Cremers’s method used active share in conjunction with tracking error to give a comprehensive picture of how active a fund is in the dimensions of both holdings and returns.
The active share study provocatively found that one-third of actively managed mutual funds were “closet indexers.” The study revealed a positive correlation between a fund's active share value and the fund's performance against its benchmark; the greater the difference between the fund's asset composition and its benchmark, the greater the active share. The method of measuring an active fund using both tracking error and active share allows funds to be characterized by how much and what type of active management they practice.

Active Share Study

Annual turnover is the percentage rate at which a mutual fund or exchange-traded fund replaces its investment holdings on an annual basis.

Annual turnover is the percentage rate at which something changes ownership over the course of a year. portfolio turnover   \=   max &ApplyFunction; { fund purchases fund sales average assets \\begin{aligned}&\\text{portfolio turnover}\\ =\\ \\frac{\\operatorname{max}\\begin{cases} \\text{fund purchases}\\\\ \\quad \\text{fund sales}\\end{cases}}{\\text{average assets}}\\end{aligned} ​portfolio turnover \= average assetsmax{fund purchasesfund sales​​​
For example, if a mutual fund held $100 million in assets under management (AUM) and $75 million of those assets were liquidated at some point during the measurement period, the calculation is:
$ 7 5 m $ 1 0 0 m \= 0 . 7 5 where: \\begin{aligned}&\\frac{\\$75\\text{m}}{\\$100\\text{m}}=0.75\\\\&\\textbf{where:}\\\\&\\text{m}=\\text{million}\\end{aligned} ​$100m$75m​\=0.75where:​
It is important to note that a fund turning over at 100% annually has not necessarily liquidated all positions with which it began the year. Annualized turnover is often a future projection based on one month—or another shorter period of time—of investment turnover.
A high turnover rate by itself is not a reliable indicator of fund quality or performance. Businesses look at annual turnover rates to determine their efficiency and productivity while investment managers and investors use turnover rate to understand the activity of a portfolio. Consider the American Century Small Cap Growth fund (ANOIX), a four-star-rated Morningstar fund with a frantic 141% turnover rate (as of February 2021) that outperformed the S&P 500 Index considently over the last 15 years (through 2021).

Annual Turnover

The Anti-Reciprocal Rule is a regulation created by the Financial Industry Regulatory Authority to protect investors from conflicts of interest.

Compensation Arrangements with respect to Sale of Mutual Fund Shares

FINRA's National Adjudicatory Council Affirms $5 Million Fine Against American Funds Distributors for Violating FINRA's Anti-Reciprocal Rule

The Anti-Reciprocal Rule refers to a regulation designed to protect individual investors from conflicts of interest that may arise from the collaboration of certain brokerage firms and mutual funds. The NAC upheld a decision that found that AFD violated the rule when by directing more than $98 million in brokerage commissions to almost 50 securities firms that sold its mutual funds between 2001 and 2003: First adopted by FINRA in 1973, the rule aims to prevent arrangements between brokerage firms and mutual funds that may be—or may appear to be—mutually beneficial to them rather than to their investors. Some of these situations include requests made by dealers, or offers or agreements by primary underwriters:
When it relates to a certain amount of brokerage commissions in relation to the sale of fund shares by the dealer
When business is used to finance any part of a dealer's sales

Anti-Reciprocal Rule

An after reimbursement expense ratio represents the actual expenses paid by a mutual fund investor.

An after reimbursement expense ratio represents the actual expenses paid by a mutual fund investor. For example, a company that runs an actively managed mutual fund that charges 1.25% a year but is consistently underperforming may decide to reimburse 0.50% of fees for a certain time period, in order to bring the fund’s after-reimbursement expenses in line with rivals that performed similarly but only charged fees of 0.75%. Keeping fees technically the same but offering a temporary reimbursement helps keeps customers satiated, then lets the mutual fund company claim its fees did not go up when the reimbursement ends. In addition, some mutual funds that invest in multiple mutual funds to achieve better diversification reimburse a portion of fees for the underlying funds in which they invest. In addition, some mutual funds that invest in multiple mutual funds to achieve better diversification, reimburse a portion of fees for the underlying funds in which they invest.

After Reimbursement Expense Ratio

An asset management company (AMC) invests pooled funds from clients into a variety of securities and assets.

An asset management company (AMC) is a firm that invests pooled funds from clients, putting the capital to work through different investments including stocks, bonds, real estate, master limited partnerships, and more. Along with high-net-worth individual (HNWI) portfolios, AMCs manage hedge funds and pension plans, and—to better serve smaller investors—create pooled structures such as mutual funds, index funds, or exchange-traded funds (ETFs), which they can manage in a single centralized portfolio. AMCs are generally distinguished by their assets under management (AUM)—the amount of assets that they manage.
An asset management company (AMC) invests pooled funds from clients into a variety of securities and assets. AMCs vary in terms of their size and operations, from personal money managers that handle high-net-worth (HNW) individual accounts and have a few hundred million dollars in AUM, to giant investment companies that offer ETFs and mutual funds and have trillions in AUM. Thus, charging fees as a percentage of AUM serves to align the AMC's interests with that of the client; if the AMC's clients prosper, so does the AMC, but if the clients' portfolios make losses, the AMC's revenues will decline as well.

Asset Management Company (AMC)

An automatic reinvestment plan is a mutual fund plan that automatically reinvests capital gains back into the fund.

An automatic reinvestment plan (ARP) is a plan that automatically reinvests capital gains or dividends back into a portfolio. An ARP should not be confused with an automatic investment plan (AIP), which is a program that allows investors to contribute new money to an investment account at regular intervals to be invested in a pre-set strategy or portfolio.
An automatic reinvestment plan takes investment gains and uses them to purchase additional assets. An example of a type of automatic reinvestment plan is a dividend reinvestment plan (DRIP), which is a program that allows investors to reinvest their cash dividends into additional shares or fractional shares of the underlying stock on the dividend payment date. Compound interest (or compounding interest) is interest calculated on the initial principal and on the accumulated interest of previous periods of a deposit or loan. Compound interest can be thought of as “interest on interest” and will make a sum grow at a faster rate than simple interest, which is calculated only on the principal amount.

Automatic Reinvestment Plan

Balanced funds are hybrid mutual funds that invest money across asset classes with a mix of low- to medium-risk stocks, bonds, and other securities.

Vanguard Balanced Index Fund Admiral Shares (VBIAX)

A balanced fund is a mutual fund that typically contains a component of stocks and bonds. Also, investors can't use a bond laddering strategy—buying bonds with staggered maturity dates—to adjust cash flows and repayment of principal according to their financial situation.
The characteristic allocation of a balanced fund—usually 60% equities, 40% bonds—may not always suit an investor's financial goals since needs and preferences can change over time. Balanced funds are mutual funds that invest money across asset classes, including a mix of low- to medium-risk stocks and bonds. The investment objective for a balanced mutual fund tends to be a mixture of growth and income, which leads to the balanced nature of the fund. Typically, balanced funds stick to a fixed asset allocation of stocks and bonds, such as 70% stocks and 30% bonds.

Balanced Fund

A business development company is a type of closed-end fund that makes investments in developing companies and in firms that are financially distressed.

A business development company (BDC) is an organization that invests in small- and medium-sized companies as well as distressed companies. A business development company (BDC) is an organization that invests in small- and medium-sized companies as well as distressed companies. BDCs provide investors with exposure to debt and equity investments in predominantly private companies—typically closed to investments. Set up similarly to closed-end investment funds, many BDCs are typically public companies whose shares trade on major stock exchanges, such as the American Stock Exchange (AMEX), Nasdaq, and others. Many BDCs make investments in private companies and sometimes in small public firms that have low trading volumes.

Business Development Company (BDC)

A bear fund is a mutual fund designed to provide higher returns when the market declines in value.

SCHEDULE OF INVESTMENTS. INVERSE S&P 500® STRATEGY FUND

Rydex Inverse S&P 500® Strategy Inv RYURX

A bear fund is a mutual fund that investors use to provide higher returns amid market downturns. A bear mutual fund may be a way for investors to find alpha, otherwise known as “excess return” or “abnormal rate of return,” during turbulent times, but a bear fund should never be an investor's only holding. A bear fund is a mutual fund that investors use to provide higher returns amid market downturns. A bear fund is attractive for investors who want to hedge their exposure to market downturns or those looking for a short-term investment. A bear fund is a mutual fund designed to provide higher returns amid market downturns.

Bear Fund

A benchmark for correlation values is a point of reference that an investment fund uses to measure important correlation values such as beta or R-squared.

A benchmark for correlation values is a benchmark, or specific point of reference, that an investment fund or individual investor uses to measure important correlation values of their portfolios, such as beta, which measures the volatility of a security to the market as a whole, or R-squared, a statistical measure that shows how much of the variance for a dependent variable can be explained by an independent variable. A benchmark for correlation values is a benchmark, or specific point of reference, that an investment fund or individual investor uses to measure important correlation values of their portfolios, such as beta, which measures the volatility of a security to the market as a whole, or R-squared, a statistical measure that shows how much of the variance for a dependent variable can be explained by an independent variable. If the range of values is between -1.0 and 1.0, a correlation of -1.0 shows a perfect negative correlation; meaning that the two variables are not at all in alignment, while a correlation of 1.0 shows a perfect positive correlation, indicating that the variables are closely following one another. A benchmark for correlation values is a point of reference that an investment fund uses to measure the correlation of financial metrics. Most often correlation coefficient values range between -1.0 and 1.0, with -1.0 indicating the lowest correlation and 1.0 indicating the highest correlation.

Benchmark for Correlation Values

The before reimbursement expense ratio measures the operating expenses of a mutual fund as a percentage of total assets, before shareholder reimbursement.

The before reimbursement expense ratio is the percentage of total assets a mutual fund must pay to cover operating expenses, measured before managers reimburse any of those fees. If a mutual fund has committed to a capped expense ratio in its prospectus or simply elects to keep it competitively low, it will reimburse investors a portion of operation expenses to boost returns and at the same time produce a lower, after reimbursement expense ratio.
The after reimbursement expense ratio is the one with an immediate impact on investors’ earnings, but the before reimbursement expense ratio also deserves attention. The before reimbursement expense ratio, or gross expense ratio, measures the annual operating expenses charged to investors in a mutual fund as a percentage of that fund’s assets. The expense ratio calculated after deducting reimbursements is the after reimbursement expense ratio, or net expense ratio. The before reimbursement expense ratio is the percentage of total assets a mutual fund must pay to cover operating expenses, measured before managers reimburse any of those fees.

Before Reimbursement Expense Ratio

A capital gains distribution is a payment by a mutual fund or an exchange-traded fund of a portion of the proceeds from the fund's sales of stocks and other assets.

Mutual Funds (Costs, Distributions, etc.) 4

A capital gains distribution is a payment by a mutual fund or an exchange traded fund (ETF) of a portion of the proceeds from the fund's sales of stocks and other assets from within its portfolio. While capital gains distributions from pooled investments are treated as long-term capital gains, an individual may buy and sell fund or ETF shares with a holding period of less than one year, which would result in short-term capital gains or losses for those shares. Under current IRS regulations, capital gains distributions from mutual fund or ETF holdings are taxed as long-term capital gains, no matter how long the individual has owned shares of the fund. A capital gains distribution is a payment by a mutual fund or an exchange traded fund (ETF) of a portion of the proceeds from the fund's sales of stocks and other assets from within its portfolio. The owners of mutual fund shares have the option to take the capital gains distribution in the form of immediate payments or to reinvest it in additional fund shares.

Capital Gains Distribution

Clean shares are a relatively new class of mutual fund shares introduced, along with T shares, in response to the Department of Labor’s fiduciary rule.

Fiduciary Rule Should Be Largely Positive for Investors

Clean shares are a relatively new class of mutual fund shares. The class A fund shares charge a maximum load of 5.75% and charges a net expense ratio of 0.59% per year.﻿﻿ With a T share class of the same fund, an investor would still pay the 0.59% annually, but their broker would only be able to charge a maximum 2.5% sales load. Clean shares thus serve to provide investors access to the exact same fund management as other retail mutual fund share classes, but typically with lower and more transparent costs. Clean shares are mutual fund shares that were designed to increase transparency and decrease conflicts of interest by providing a single uniform price across the board. Unlike T shares, clean shares do not have front-end sales loads or annual 12b-1 fees for fund services.

Clean Shares

A closed-end fund raises capital for investment through a one-time sale of a limited number of shares, which may then be traded on the markets.

Eaton Vance Tax Managed Global Diversified Equity Income Fund

A closed-end fund is a type of mutual fund that issues a fixed number of shares through a single initial public offering (IPO) to raise capital for its initial investments. Pros
Diversified portfolio
Professional management
Transparent pricing
Potential for higher yields
Subject to volatility
Less liquid than open-end funds
Available only through brokers
May get heavily discounted
Its pricing is one of the unique characteristics of a closed-end fund. A closed-end fund is a type of mutual fund that issues a fixed number of shares through a single initial public offering (IPO) to raise capital for its initial investments. As a result, closed-end funds may be able to offer higher overall returns than their open-fund mutual fund counterparts. However, the closed-end fund's parent company will issue no additional shares, and the fund itself won't buy back shares.

Closed-End Fund

A comparison universe for a professionally-managed fund is a grouping of peers with similar objectives that serves as a performance benchmark.

The Lipper Leader Rating System: US Methodology

Reuters acquires the Fund Information Business of Lipper Analytical Services Inc.

The Morningstar Rating for Funds: A Good Starting Point for Investors?

A comparison universe is a grouping of professionally managed investment portfolios or funds with similar mandates and objectives that serves as a benchmark for performance. For example, a fund manager who handles a value stock fund might object to a direct comparison of the fund's performance with Morningstar’s large-cap comparison universe. A portfolio that consistently beats its index benchmark but regularly falls short of its comparison universe is demonstrating a problem: Either it’s in the wrong comparison universe or its benchmark is too easy to beat. Lipper and Morningstar are the two main sources of comparison universes in the U.S.
The performance of a professionally-managed portfolio or fund can be evaluated in two ways:
The first is the index benchmark. A comparison universe is a grouping of professionally managed investment portfolios or funds with similar mandates and objectives that serves as a benchmark for performance.

Comparison Universe

Mutual fund costs and expenses can reflect the quality of an investment.

Costs and expenses are the expenses associated with running a mutual fund. The following fees may appear as shareholder fees:
Sales loads
A sales charge on purchases
Deferred sales charge
Redemption fee
Exchange fee
Account fee
Purchase fee
The following may appear as annual fund operating expenses:
Management fees
Distribution (and/or service) 12b-1 fees
The following may appear as other expenses:
Total annual operating expenses (or the fund’s expense ratio) One of the most significant responsibilities of a fund’s board of directors is negotiating and reviewing the advisory contract between the fund and the investment adviser to the fund, including fees and expense ratios. Mutual fund costs and expenses are the expenses associated with running a mutual fund. The fund’s directors function as watchdogs and should protect the interests of the fund’s shareholders and keep costs and expenses to a minimum.

Mutual Fund Costs and Expenses

A country fund is a mutual fund that invests in the stocks of corporations from only one country.

A country fund is a mutual fund that invests only in the securities of companies in one country. However, country funds can easily be used to supplement a global portfolio and concentrate a bet on a region, in effect overweighting a single country, while the global fund maintains diversification. A country fund is a mutual fund that invests only in the securities of companies in one country. A country fund for Russia, for example, will only invest in assets based in that country, such as the stocks of Russian companies, Russian government debt, and other Russian-based financial instruments. A country fund will also be exposed to the political risk of any country, particularly so if the country has demonstrated a history of instability.

Country Fund

Cumulative discount privilege offers lower fees to customers who place assets in several funds offered by the same mutual fund company.

Cumulative discount privilege is a way for mutual fund investors to qualify for lower fees for a particular fund based on the total amount invested in several funds offered by the same mutual fund company, typically from the same fund family. Cumulative discount privilege is a way for mutual fund investors to qualify for lower fees for a particular fund based on the total amount invested in several funds offered by the same mutual fund company, typically from the same fund family. Cumulative discount privilege allows mutual fund investors to qualify for lower fees based on the total amount invested in several funds offered by the same mutual fund company. The cumulative discount privilege gives investors this discount based on a minimum that applies to all related funds, rather than a particular fund. The cumulative discount privilege gives investors a discount based on a minimum that applies to all related funds, rather than a particular fund.

Cumulative Discount Privilege

Distributions are payments that derive from a designated account, such as income generated from a pension, retirement account, or trust fund.

Table of Contents
What Is Distribution?
Understanding Distributions
Distributions From Mutual Funds
Stock and Bond Distributions
Investment Trust Distributions
Retirement Account Distributions
Required Distributions From Retirement Plans However, the term is used most commonly to describe the following situations:
1.  When a mutual fund distributes capital gains, dividend, or interest income to fund owners
2.  When a publically traded company distributes interest or returns capital to shareholders
3.  When a retirement account owner takes distributions in the form of taxable income A capital gains distribution is a cash payment made by a mutual fund or exchange-traded fund (ETF) to fund owners. After the account has been in existence for a certain number of years, account holders may withdraw funds early but will pay penalty fees if they withdraw a sum greater than their contributions—if the distribution includes the account's earnings, in other words. With mutual funds, distributions represent the allocation of capital gains and dividend or interest income generated by the fund for the investors periodically during a calendar year.

Distribution

Exchange privilege is an opportunity given to mutual fund shareholders to exchange their investment in a fund for another within the same fund family.

Exchange privilege is the opportunity given to mutual fund shareholders to exchange their investment in a fund for another within the same fund family. Exchange privilege is the opportunity given to mutual fund shareholders to exchange their investment in a fund for another fund within the same fund family. Exchange privileges allow an investor to exchange ownership from one mutual fund to any other mutual fund in the fund family. Exchange privilege is the opportunity given to mutual fund shareholders to exchange their investment in a fund for another within the same fund family. Investors who take advantage of exchange privilege within a fund family are able to rotate their investment strategy based on market conditions and generally take advantage of the various funds offered by the mutual fund company.

Exchange Privilege

An exchange-traded mutual fund (ETMF) is an exchange-traded security that is a hybrid between an exchange-traded fund (ETF) and an open-end mutual fund. 

An exchange-traded mutual fund (ETMF) is an exchange-traded security that is a hybrid between an exchange-traded fund (ETF) and an open-end mutual fund. An exchange-traded mutual fund (ETMF) is an exchange-traded security that is a hybrid between an exchange-traded fund (ETF) and an open-end mutual fund. Other NextShares funds include: Floating-Rate NextShares (EVFTC), Global Income Builder NextShares (EVGBC), Oaktree Diversified Credit NextShares (OKDCC), Stock NextShares (EVSTC), and TABS 5-to-15 Year Laddered Municipal Bond NextShares (EVLMC). NextShares are listed and trade on Nasdaq, much like exchange-listed stocks and ETFs, but are priced at the fund’s next end-of-day net asset value (NAV) plus or minus a trading cost determined when the trade executes. Exchange-traded mutual funds (ETMFs) are mutual fund shares that are listed on exchanges where ordinary investors can buy and sell them on the secondary market.

Exchange-Traded Mutual Fund (ETMF)

An expense limit is a limit placed on the operating expenses incurred by a mutual fund.

NASD Regulation Requests Comment on Amendments to Rule Governing Sale and Distribution of Investment Company Shares and Variable Insurance Products

Table of Contents
What Is an Expense Limit?
Understanding an Expense Limit
Capped Funds
Investing in Capped Funds
Types of Mutual Fund Fees Capped indices from S&P include the following:
S&P/TSX 60 Capped
S&P/TSX Capped Composite
S&P/TSX Capped Energy
S&P Russia BMI Capped
S&P Italy LargeMidCap Capped
S&P All Africa Capped
DJCI Gas & Oil Capped Component
S&P GSCI Cap Component
These funds are just a selection from Standard and Poor's. With an expense limit, investor fees won't ever top the stated limit, although the fund can choose to charge under the stated limit. Expense limits benefit investors as they limit the fees a mutual fund can charge; they also make fully clear to investors what the maximum percentage is that they might be charged, which improves corporate transparency. With an expense limit, fees will never rise above the stated percentage; however, the fund may charge under the stated limit.

Expense Limit

A folio number is a unique identifier used to keep track of investments or pieces of property.

In mutual funds, a folio number is a unique number identifying your account with the fund. A folio number is a unique number to identify accounts with a mutual fund, and you can get your folio number from your investment statements or through a broker. An investor can have multiple folio numbers kept with the same mutual fund company, but they can ask the fund company to consolidate them into a single number. In mutual funds, a folio number is a unique number identifying your account with the fund. Like a bank account number, the folio number can be used as a way to uniquely identify fund investors.

Folio Number

A franking credit, also called an imputation credit, is a type of tax credit paid by corporations to their shareholders along with dividend payments.

A franking credit, also known as an imputation credit, is a type of tax credit paid by corporations to their shareholders along with their dividend payments. This is the standard calculation for calculating franking credits:
**Franking credit** = (dividend amount / (1-company tax rate)) - dividend amount
If an investor receives a $70 dividend from a company paying a 30% tax rate, their full franking credit would be $30 for a grossed-up dividend of $100.
To determine an adjusted franking credit, an investor would adjust the franking credit according to their tax rate. A franking credit, also known as an imputation credit, is a type of tax credit paid by corporations to their shareholders along with their dividend payments. When filing personal income taxes, an investor receiving a franking credit will typically record as income both the amount of the dividend and the amount of the franking credit. Since corporations have already paid taxes on the dividends they distribute to their shareholders, the franking credit allows them to allocate a tax credit to their shareholders.

What Are Franking Credits?

A front-end load is a sales charge or commission that an investor pays "upfront"—that is, upon purchase of the asset, usually a mutual fund or an insurance product.

A front-end load is a commission or sales charge applied at the time of the initial purchase of an investment. The percentage paid for the front-end load varies among investment companies but typically falls within a range of 3.75% to 5.75%.
While they leave less capital to invest, front-end-loaded funds have lower ongoing fees and expense ratios.
When mutual fund investments and annuities were first introduced to the market, investors were only able to access them through licensed brokers, investment advisors, or financial planners. Similarly, the majority of front-end load investments do not charge investors an additional sales charge when shares are exchanged for a different investment, as long as the same fund family offers the new investment. The opposite of a front-end load is a back-end load, which is paid by deducting it from profits or principal when the investor sells the investment. Also, given the plethora of no-load mutual funds available currently, some financial advisors argue that no one should be paying any sales charges—front, back, or ongoing.
Many companies offer mutual funds with varying loads to meet the investing style of any investor.

Front-End Load

Go-go fund is a slang name for a mutual fund that focuses on high-risk securities and attempts to capture above-average returns. 

Remembering the Past: Mutual Funds and the Lessons of the Wonder Years

Go-go fund is a slang name for a mutual fund that has an investment strategy focused on high-risk securities in an attempt to capture above-average returns. However, the funds were often fueled by speculative investments that were unreliable and lost their popularity following the stock market crashes of the 1970s.
Go-go funds entice investors by promising large, abnormal returns created from shifting portfolio weights around speculative information. Go-go fund is a slang name for a mutual fund that has an investment strategy focused on high-risk securities in an attempt to capture above-average returns. These funds were at their popularity peak in the 1960s, appealing to investors drawn in by the promise of unusually high market returns. A go-go fund is a mutual fund with an investment strategy focused on growth stocks and other high-risk securities.

Go-Go Fund

A growth of 10K chart depicts the change in value of an initial $10,000 investment during a specific period of time, often since the asset’s inception.

Growth of 10K (or growth of 10,000) is a commonly used chart that highlights the change in value of an initial $10,000 investment in a financial asset during a given period of time. Mutual fund companies are significant users of growth of 10K charts and feature them prominently in marketing materials.
Growth of 10K depicts the growth over time of a hypothetical $10,000 investment in some asset or portfolio. According to the SEC, each mutual fund annual report must include a “line graph comparing the performance during the last 10 years, or for the life of the fund, if shorter, of a hypothetical $10,000 initial investment against an index.” Growth of 10K charts are a staple of mutual fund annual reports, and nearly all fund companies post interactive growth of 10K charts on their websites. Growth of 10K (or growth of 10,000) is a commonly used chart that highlights the change in value of an initial $10,000 investment in a financial asset during a given period of time.

Growth Of 10K

Historic pricing is a method for calculating the value of an asset using the last valuation point calculated. 

Historic pricing is a unit pricing method used to calculate the value of an asset using the last valuation point calculated. Fund managers have two options: they can look at the last calculated net asset value (also known as the historic valuation point), or they can note the net asset value of the next valuation point.
An investor looking to buy a fund based on historic pricing knows how many shares can be purchased for a certain amount of money because the valuation point is known. Historic pricing is a unit pricing method used to calculate the value of an asset using the last valuation point calculated. The buyer's risk is that the net asset value of the fund actually decreases by the next valuation point, meaning that they will have spent more on a particular number of shares. Historic pricing is a method for calculating an investment's net asset value (NAV) based on changes from its previous valuation.

Historic Pricing

Income risk is the risk that the income stream paid by a fund will decrease in response to a drop in interest rates.

Income risk is the risk that the income stream paid by a fund will decrease in response to a drop in interest rates. The fluctuation of interest rates can often have a significant effect on the performance of various investments held by a short-term investment fund; this increases the degree of income risk for that fund because the income generated by the fund is continually reinvested at the current rate. Income risk is the same concept as interest-rate risk, but the income risk applies to funds, while the interest-rate risk applies to individual debt securities. One strategy for minimizing the degree of income risk associated with a portfolio is to diversify the assets so that long-term investments with fixed rates of interest are balanced with short-term income fund holdings. This risk is most prevalent in the money market and other short-term income fund strategies (versus longer-term strategies that lock in interest rates).

Income Risk

An index hugger is a managed mutual fund that tends to perform much like a benchmark index.

The term index hugger refers to an actively managed mutual fund that, despite active management, performs like and tracks a major benchmark index like the S&P 500. The term index hugger refers to an actively managed mutual fund that, despite active management, performs like and tracks a major benchmark index like the S&P 500. Because the fees associated with index huggers may outweigh the benefits, many investors would be better off allocating their assets into a low-cost index exchange-traded fund (ETF). The type of assets a fund invests in is based on its investment strategy—a fixed income mutual fund invests in fixed income instruments while a global equity fund invests in international equities. An index hugger refers is an actively managed mutual fund that nevertheless performs like a benchmark index.

Index Hugger

An investment fund is the pooled capital of investors that enables the fund manager make investment decisions on their behalf. 

An investment fund is a supply of capital belonging to numerous investors used to collectively purchase securities while each investor retains ownership and control of his own shares. Types of investment funds include mutual funds, exchange-traded funds, money market funds, and hedge funds. Exchange-traded funds (ETFs) emerged as an alternative to mutual funds for traders who wanted more flexibility with their investment funds. While investment funds in various forms have been around for many years, the Massachusetts Investors Trust Fund is generally considered the first open-end mutual fund in the industry. Closed-end funds are managed investment funds that issue a fixed number of shares, and trade on an exchange.

Investment Fund

A Lipper Leader is a gauge of a mutual fund's success based on whether it meets a set of goals for total return, consistent return and other measures.

Lipper ranks mutual funds based on five metrics:
Total return or the actual rate of return over a specific period of time
Consistent return
Capital preservation, which is a means by which investors can prevent loss
Tax efficiency
Expenses such as sales loads, redemption fees, account fees, management fees, and others The system is owned by market analytics and data provider Refinitiv, a company that is partly owned by Thomson Reuters (TRI).
Lipper Leader is a rating system that ranks success based on whether mutual funds meet a specific set of goals. Investors can use the system to choose funds that help meet their financial goals.
The Lipper Leader rating system was developed by Lipper Analytical Services, which was established in 1973. The Lipper Leader system ranks funds based on total return, consistent return, capital preservation, tax efficiency, and expenses.

Lipper Leader

Load-waived funds are a type of mutual fund in which investors don't have to pay certain fees they otherwise would, such as front-end loads.

Load-waived funds are a share class of a mutual fund that waives load fees typically charged to its investors (such as front-end loads). Whereas the load-waived fund is a fund offered by an adviser or broker who might remove (waive) the load fee but keep others, such as the 12b-1 fee, a true no-load fund does not charge any load whatsoever and does not have any fees, including 12b-1 fees. Load-waived funds are distinct from no-load funds, which do not charge any fees at all; load-waived funds will still charge an annual marketing and distribution fee, called a 12b-1. On the other hand, load-waived funds are mutual fund share class alternatives to loaded funds, such as class A share funds. No-load funds and load-waived funds do not charge a mutual fund load.

Load-Waived Funds

Manager universe (benchmark) is a group of investment managers who have the same investment style. It is used to compare fund performance versus peers.

A manager universe (benchmark) refers to a peer group of investment managers who have the same investment style. Lipper Leaders help investors decide which funds meet their investment goals and match their preferences, although they do not attempt to predict future performance.
Evaluating a manager universe (benchmark) data is a way for investors to comparison shop for funds. A manager universe (benchmark) refers to a peer group analysis of investment managers who have the same investment style. A manager universe (benchmark) refers to a peer group of investment managers who have the same investment style. Comparing the performance of one investment manager to their peer group is done through a manager universe (benchmark).

Manager Universe (Benchmark)

Market neutral is a risk-minimizing strategy that entails a portfolio manager picking long and short positions so they gain in either market direction.

Vanguard Market Neutral Fund Investor Shares (VMNFX)

A market-neutral strategy is a type of investment strategy undertaken by an investor or an investment manager that seeks to profit from both increasing and decreasing prices in one or more markets while attempting to completely avoid some specific form of market risk. Except for pure short-selling strategies, market-neutral strategies historically have the lowest positive correlations to the market specifically because they place specific bets on stock price convergences while hedging away the general market risk. While market-neutral funds use long and short positions, this fund category's goal is distinctly different from plain long/short funds. Because it is a market-neutral strategy, the Vanguard Market Neutral Investor Shares Fund (VMNFX) uses long and short-selling strategies, unlike the firm's other mutual funds, which only buy and sell long positions. A market-neutral strategy is a type of investment strategy undertaken by an investor or an investment manager that seeks to profit from both increasing and decreasing prices in one or more markets while attempting to completely avoid some specific form of market risk.

Market Neutral

Market timing is an investment strategy that involves making trades in anticipation of price fluctuations, based on technical or fundamental research.

Quantitative Analysis of Investor Behavior

TARGET DATE FUNDS: WHAT’S UNDER THE HOOD?

Active Funds vs. Passive Funds: Which Fund Types Had Increased Success Rates?

BofA vice chair: ‘Time in the market, not timing the market’ proves most lucrative long term

Table of Contents
What Is Market Timing?
Understanding Market Timing
Pros and Cons of Market Timing
Criticism of Market Timing If investors can predict when the market will go up and down, they can make trades to turn that market move into a profit.
Timing the market is often a key component of actively managed investment strategies, and it is almost always a basic strategy for traders. For the average investor who does not have the time or desire to watch the market daily—or in some cases hourly—there are good reasons to avoid market timing and focus on investing for the long run. For the average investor who does not have the time or desire to watch the market daily—or in some cases hourly—there are good reasons to avoid market timing and focus on investing for the long run. Market timing is the opposite of a buy-and-hold strategy, where investors buy securities and hold them for a long period, regardless of market volatility.

Market Timing

A master trust is an investment vehicle that collectively manages pooled investments. 

A master trust is an investment vehicle that collectively manages pooled investments. In a master-feeder structure, assets are pooled, managed, and transacted from the master trust. A master trust is used as part of a comprehensive asset management scheme for a strategy managed with a master-feeder structure. A unit investment trust (UIT) may also be known as a type of master trust. It can refer to the main fund where assets are pooled and collectively managed in a master-feeder structure, also called a hub and spoke structure.

Master Trust

A money market fund is a type of mutual fund that invests in high-quality, short-term debt instruments and cash equivalents.

Supplement to the Fidelity Government Money Market Fund, Fidelity Money Market Fund, Fidelity Treasury Money Market Fund, and Fidelity Treasury Only Money Market Fund

Re: IOSeO Money Market Fund Systemic Risk Analysis and Reform Options

Report of the President’s Working Group on Financial Markets

Disclosure of Mutual Fund Performance and Portfolio Managers

Removal of Certain References to Credit Ratings and Amendment to the Issuer Diversification Requirement in the Money Market Fund Rule

Table of Contents
What Is a Money Market Fund?
How a Money Market Fund Works Many funds also provide investors with tax-advantaged gains by investing in municipal securities that are tax-exempt at the federal tax level (and in some instances at the state level, too).
Very low-risk
Highly liquid
Better returns than bank accounts
Not FDIC-insured
No capital appreciation
Sensitive to interest rate fluctuations, monetary policy
It's important to keep in mind that money market funds are not covered by the FDIC's federal deposit insurance, while money market deposit accounts, online savings accounts, and certificates of deposit, are covered by this type of insurance. They issue redeemable units or shares to investors, and they are mandated to follow the guidelines drafted by financial regulators (for example, those set by the U.S. Securities and Exchange Commission (SEC)).
A money market fund may invest in the following types of debt-based financial instruments:
Bankers' Acceptances (BA)—short-term debt guaranteed by a commercial bank
Certificates of deposit (CDs)—bank-issued savings certificate with short-term maturity
Commercial paper—unsecured short-term corporate debt
Repurchase agreements (Repo)—short-term government securities
U.S. Treasuries—short-term government debt issues The interest rates that are available on the various instruments that constitute the portfolio of a money market fund are the key factors that determine the return from a given money market fund. Under the provisions, a money fund mainly invests in the top-rated debt instruments, and they should have a maturity period under 13 months.﻿﻿ The money market fund portfolio is required to maintain a weighted average maturity (WAM) period of 60 days or less.

Money Market Fund

Morningstar risk ratings assess one of five levels of risk for mutual funds and ETFs to give investors a quick idea of their portfolio suitability.

The Morningstar risk rating, or simply Morningstar rating, is a ranking given to publicly traded mutual funds and exchange-traded funds (ETFs) by the investment research firm Morningstar. The Morningstar risk rating, or simply Morningstar rating, is a ranking given to publicly traded mutual funds and exchange-traded funds (ETFs) by the investment research firm Morningstar. For example, as of year-end 2018, Morningstar assigns a 3.9-star rating to municipal bond funds as a group, a 3.4-star rating to domestic stock funds and a 3-star rating to international stock funds. The Morningstar risk rating is a ranking given by research firm Morningstar to publicly traded mutual funds and exchange-traded funds (ETFs). Morningstar ratings are based on the fund's past performance as compared to other funds in its Morningstar category.

Morningstar Risk Rating

The Mutual Fund Dealers Association (MFDA) is a Canadian regulatory body overseeing domestic distributors of mutual funds and exempt fixed-income products.

MFDA Households and Assets Under Administration by Province

The Mutual Fund Dealers Association of Canada (MFDA) is a self-regulatory organization (SRO) that oversees the Canadian mutual fund industry as it relates to the sale of mutual funds to retail investors. The Mutual Fund Dealers Association of Canada (MFDA) is a self-regulatory organization (SRO) that oversees the Canadian mutual fund industry as it relates to the sale of mutual funds to retail investors. This will bring MFDA members more in line with the members of several other Canadian regulatory bodies, such as the Investment Industry Regulatory Organization of Canada (IIROC), by requiring a number of professional development credits on a two-year cycle.﻿﻿ Included in the MFDA's 2018-2022 Strategic Plan is a key initiative to impose a continuing education requirement on MFDA advisers who, unlike life insurance agents and financial planners, do not currently need to earn continuing education credits to maintain their license in Canada. The Mutual Fund Dealers Association of Canada is a self-regulatory organization that oversees the Canadian mutual fund industry.

Mutual Fund Dealers Association (MFDA)

A mutual fund is a type of investment vehicle consisting of a portfolio of stocks, bonds, or other securities, which is overseen by a professional money manager.

Fact Sheet: The New Morningstar Style Box™ Methodology,

Early Evidence on the Department of Labor Conflict of Interest Rule: New Share Classes Should Reduce Conflicted Advice, Likely Improving Outcomes for Investors,

Table of Contents
What Is a Mutual Fund?
Understanding Mutual Funds
How Mutual Funds Work
Types of Mutual Funds
Mutual Fund Fees
Classes of Mutual Fund Shares
Advantages of Mutual Funds
Disadvantages of Mutual Funds
Example of a Mutual Fund
A mutual fund is a type of financial vehicle made up of a pool of money collected from many investors to invest in securities like stocks, bonds, money market instruments, and other assets. Other common types of mutual funds include money market funds, sector funds, alternative funds, smart-beta funds, target-date funds, and even funds of funds, or mutual funds that buy shares of other mutual funds. Mutual funds are subject to industry regulation that ensures accountability and fairness to investors.
Diversification
Minimal investment requirements
Professional management
Variety of offerings
High fees, commissions, and other expenses
Large cash presence in portfolios
No FDIC coverage
Difficulty in comparing funds
Lack of transparency in holdings
Liquidity, diversification, and professional management all make mutual funds attractive options for younger, novice, and other individual investors who don't want to actively manage their money. Table of Contents
What Is a Mutual Fund?
Understanding Mutual Funds
How Mutual Funds Work
Types of Mutual Funds
Mutual Fund Fees
Classes of Mutual Fund Shares
Advantages of Mutual Funds
Disadvantages of Mutual Funds
Example of a Mutual Fund
A mutual fund is a type of financial vehicle made up of a pool of money collected from many investors to invest in securities like stocks, bonds, money market instruments, and other assets. While money market funds invest in ultra-safe assets, during the 2008 financial crisis, some money market funds did experience losses after the share price of these funds, typically pegged at $1, fell below that level and broke the buck.

Mutual Fund

A mutual-fund advisory program, also known as a mutual fund wrap, is a portfolio of mutual funds selected to match a pre-set asset allocation.

Table of Contents
Mutual-Fund Advisory Program
How It Works
Difference With Robo-Advisors
Real-World Example A mutual-fund advisory program, also known as a mutual fund wrap, is a portfolio of mutual funds that are selected to match a pre-set asset allocation. A mutual-fund advisory program, also known as a mutual fund wrap, is a portfolio of mutual funds that are selected to match a pre-set asset allocation. UBS offers PACE (Personalized Asset Consulting and Evaluation) Select Funds, a fee-based, non-discretionary mutual-fund advisory program utilizing a disciplined approach to selecting and building a diversified portfolio of mutual funds. Unlike managed accounts, where the financial adviser has full discretion over any investment decisions, mutual-fund advisory programs allow the investor to work with the adviser in developing the optimal asset-allocation strategy.

Mutual-Fund Advisory Program

Net Asset Value is the net value of an investment fund's assets less its liabilities, divided by the number of shares outstanding, and is used as a standard valuation measure.

Table of Contents
What Is Net Asset Value (NAV)?
Understanding Net Asset Value
The Formula for NAV
NAV and Mutual Funds
NAV for Exchange Traded Funds
NAV and Trade Timelines
Measuring Investment Performance
Example of NAV Calculation The formula for a mutual fund's NAV calculation is straightforward:
> NAV = (Assets - Liabilities) / Total number of outstanding shares
The correct qualifying items should be included for the assets and liabilities of a fund.
A fund works by collecting money from a large number of investors. Table of Contents
What Is Net Asset Value (NAV)?
Understanding Net Asset Value
The Formula for NAV
NAV and Mutual Funds
NAV for Exchange Traded Funds
NAV and Trade Timelines
Measuring Investment Performance
Example of NAV Calculation Most commonly used in the context of a mutual fund or an exchange-traded fund (ETF), the NAV represents the per share/unit price of the fund on a specific date or time. The fund’s NAV thereby represents a “per-share” value of the fund, which makes it easier to be used for valuing and transacting in the fund shares.

Net Asset Value – NAV

A new fund offer is the first subscription offering for any new fund offered by an investment company. Discover how to invest in an NFO.

Dreyfus Alcentra Global Credit Income 2024 Target Term Fund Attracts $140 Million in Initial Public Offering

Table of Contents
What Is a New Fund Offer (NFO)? Large upside
Access to emerging sector of the economy
Provides ability to diversify portfolio
Unproven track record
Potentially larger expense ratio
Emerging technology or industry the fund tracks may be overvalued
A new fund offer or NFO is the first offering of an open-end, closed-end, or exchange-traded fund to investors by an investment company.
While investing in an NFO may present an opportunity for large profits, investors should be wary of investing their money into a fund with no proven track record of success.
Investors can research new launches of funds either by monitoring various investment companies' press releases or by checking NFO-related news aggregate sites such as the Closed-End Fund Center.
Of course, there is no surefire method to predict with complete certainty a fund's success, particularly a brand new one. Closed-end new fund offers are often some of the most highly marketed new fund issuances since closed-end funds only issue a specified number of shares during their new fund offer. A new fund offer (NFO) is the first subscription offering for any new fund offered by an investment company. In a new fund offer, an open-end fund will announce new shares for purchase on a specified launch day.

New Fund Offer (NFO)

A no-load fund is a mutual fund in which shares are sold without a commission or sales charge. The reason for this is that the shares are distributed directly by the investment company, instead of going through a secondary party.

A no-load fund is a mutual fund in which shares are sold without a commission or sales charge. This absence of a sales charges is the opposite of a load fund—either front-load or back-load—which charges a commission at the time of the fund's purchase or sale. A no-load fund is a mutual fund in which shares are sold without a commission or sales charge.
No-load funds are possible because the shares are distributed directly by the investment company, instead of going through a secondary party. On the other hand, if the person buys a load fund that charges a front-end load (sales commission) of 5%, the amount invested in the fund is only $9,500. Expense ratios can vary widely among different mutual funds, but it is fairly routine to find no-load funds with expense ratios that are as much as 5% less than an equivalent load-bearing fund.

No-Load Fund

Non-registered accounts are a type of investment account available to Canadian citizens.

Non-registered accounts are taxable investment accounts available to Canadian citizens. The Royal Bank of Canada also offers many other accounts, including tax-free savings accounts (TFSA), registered retirement income fund accounts (RRIF), registered education savings plans (RESP), and non-personal accounts. Non-registered accounts can be used in conjunction with other types of investment accounts including registered retirement savings plan (RRSP) accounts. Non-registered accounts and registered retirement savings plans are two types of accounts offered for retail customers through banks and financial service providers. There are two primary types of non-registered brokerage accounts: cash accounts and margin accounts.

Non-Registered Account (Canada): Overview

An open-end fund is a mutual fund that can issue unlimited new shares, priced daily on their net asset value. The fund sponsor sells shares directly to investors and buys them back as well.

An open-end fund is a diversified portfolio of pooled investor money that can issue an unlimited number of shares. These are more common than their counterpart, closed-end funds, and are the bulwark of the investment options in company-sponsored retirement plans, such as a 401(k).
An open-end fund is an investment vehicle that uses pooled assets, which allows for ongoing new contributions and withdrawals from investors of the pool. Must maintain high cash reserves
Charge high fees and expenses (if actively managed)
Post lower yields (than closed-end funds)
Fidelity's Magellan Fund, one of the investment company's earliest open-end funds, aimed at capital appreciation. Some mutual funds, hedge funds, and exchange-traded funds (ETFs) are types of open-end funds. An open-end fund has unlimited shares issued by the fund and receive a NAV value at the end of the trading day.

Open-End Fund

A periodic payment plan certificate is proof of ownership in a fund that allows investors to make regular small payments over time.

A periodic payment plan certificate is proof of an ownership interest in a mutual fund that allows its investors to build up a stake by making small regular payments. A periodic payment plan certificate is proof of an ownership interest in a mutual fund that allows its investors to build up a stake by making small regular payments. The act made it illegal to sell periodic payment plan certificates to military personnel and banned their sale on military bases. The Securities and Exchange Commission (SEC) regulates investment companies that sell periodic payment plan certificates through Section 27 of the Investment Company Act of 1940. It establishes the maximum fees that can be charged, requirements for companies issuing periodic payment plan certificates, the rules regarding the surrender of certificates, their refund privileges, and more.

Periodic Payment Plan Certificate

Pooled funds, such as mutual funds, aggregate capital from many investors, allowing them to benefit from economies of scale and diversification.

Pooled funds are funds in a portfolio from many individual investors that are aggregated for the purposes of investment. Mutual funds, hedge funds, exchange traded funds, pension funds, and unit investment trusts are all examples of professionally managed pooled funds. These products include 39 Canadian ETFs and four mutual funds, along with 12 target retirement funds and eight pooled funds—the two latter groups are available to institutional investors. Groups such as investment clubs, partnerships, and trusts use pooled funds to invest in stocks, bonds, and mutual funds. The firm offers hundreds of different mutual funds, ETFs, and other pooled funds to investors around the world.

Pooled Funds

A protected fund is a type of mutual fund in which a percentage of the initial capital invested is returned to the investor, along with some capital gain, after a certain period of time.

A protected fund is a type of mutual fund that promises to return at least some portion of the initial investment to an investor. If the investor sells the fund before the end of the guarantee period, then they must absorb any losses the fund posted and must pay any early redemption fees the fund charges. A protected fund is a type of mutual fund that promises to return at least some portion of the initial investment to an investor. The initial investment can only be paid back after the guarantee period is over; if the investor sells before this period, they are subject to any losses as well as possible fees for early redemption. The protected initial investment, plus some capital gain, will be returned as long as the investor holds the original investment until the end of the contractual term.

Protected Fund

SEC Form 24F-2NT is a filing required by the SEC when an investment company sells more securities than stated in its initial registration.

Legg Mason Partners Equity Trust 2020 Annual Securities Sale Report 24F-2NT

SEC Form 24F-2NT is a filing used to inform the Securities and Exchange Commission (SEC) of the sale of additional securities. SEC Form 24F-2NT gives investment companies a way to sell additional securities while remaining in compliance with SEC rules and regulations. SEC Form 24F-2NT gives investment companies a way to sell additional securities while remaining in compliance with SEC rules and regulations. SEC Form 24F-2NT, like the related SEC Form 24F-2, is one of the numerous filings required under the Investment Company Act of 1940. SEC Form 24F-2NT is a filing used to inform the Securities and Exchange Commission (SEC) of the sale of additional securities.

SEC Form 24F-2NT

SEC Form N-30B-2 is a required SEC filing that attests that the investment company named is current with its mailings of periodic and interim reports. 

17 CFR § 270.30b2-1 - Filing of reports to stockholders

SEC Form N-30B-2 is a required filing to the U.S. Securities and Exchange Commission (SEC) for mutual fund companies. The form notifies the SEC that the investment company named is up-to-date with mailing out its reports to investors and shareholders, in accordance with the Investment Company Act of 1940. Providing shareholders with mandated reports at required intervals is important so that investment companies can prove they are operating under a strategy of full disclosure, and are not withholding or concealing any significant financial information from investors who might experience financial harm as a result. SEC Form N-30B-2 is a required filing to the U.S. Securities and Exchange Commission (SEC) for mutual fund companies. It is normally submitted by the company's general counsel and includes the following information:
The company's name and contact information
The type of reports sent to shareholders
The specific funds for which the reports were filed

SEC Form N-30B-2

Style refers to the investment approach or objective that an investment manager uses with the ultimate goal of generating returns.

Style refers to the investment approach or objective that a fund manager uses. Funds managed by all types of investment managers in the investment industry include investment documents that provide in-depth details on a fund’s investment style. Along with investment style, the prospectus will also disclose details about the levels of risk an investor can expect with the fund, fees, expenses, performance, and the types of investors who would find the fund to be the best fit. If the investment manager decides that they will change the style of the fund, then this needs to be conveyed to the investors well in advance of doing so; giving the investors enough time to redeem their money if they no longer wish to invest in that style. Style refers to the investment approach that a fund manager uses in their investment fund.

Style

T shares are a relatively new class of lower cost mutual fund shares. The “T” stands for “transaction.”

Improving Investment Advice for Workers & Retirees

Washington Mutual Investors Fund SM (AWSHX)

T shares are a relatively new class of lower-cost mutual fund shares, meant to provide less expensive access to fund management for investors by imposing lower maximum sales loads paid to brokers or advisors. T shares are a relatively new class of lower-cost mutual fund shares, meant to provide less expensive access to fund management for investors by imposing lower maximum sales loads paid to brokers or advisors. Some investment experts predict that T shares and/or clean shares could eventually replace the popular class A shares of mutual funds, particularly as it relates to the retirement investment marketplace. Because T shares provide one uniform price across the board, typically lower than typical mutual fund shares, advisors are not tempted to push an expensive fund over a more affordable one. Another new mutual fund class of shares is the so-called clean shares, which carry no sales load or 12b-1 fees whatsoever, but where a broker or advisor can attach their own advisory fee to it, making the process more transparent.

T Shares

A target-date fund is a fund offered by an investment company that seeks to grow assets over a specified period of time for a targeted goal.

Vanguard Target Retirement 2065 Fund (VLXVX)

Vanguard Target Retirement 2025 Fund (VTTVX)

Table of Contents
What Is a Target-Date Fund?
How a Target-Date Fund Works
Risk Tolerance
Advantages They are technically a fund of funds (FoF)—a fund that invests in other mutual funds or exchange-traded funds—which means you have to pay the expense ratios of those underlying assets, as well as the fees of the target-date fund. It has allocated 35.4% of assets to the Vanguard Total Stock Market Index Fund, 28% to the Vanguard Total Bond Market II Index Fund, 23.8% to the Vanguard Total International Stock Index Fund, 12% to the Vanguard Total International Bond Index Fund, and 0.80% to the Vanguard Short-Term Inflation-Protected Securities Index Fund. Some target-date funds, known as (To funds) will also manage funds to a specified asset allocation past the target date. In the years beyond the target date, both Vanguard target-date funds report an asset allocation mix of approximately 20% in U.S. equities, 10% in international equities, 40% in U.S. bonds, 10% in international bonds, and about 20% in short-term TIPS.

Mutual Fund Essentials

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