» Dictionary of Mutual Fund Terms

Mutual Fund Glossary

Enterprise Value Definition and Calculation

The term enterprise value is frequently encountered in the financial literature. This article provides enterprise value definition which will help you to understand how it is calculated the next time you see it an annual report.

Mutual Fund Style Drifting

The style drift phenomenon is observed whenever the mutual fund deviates from the pre-stated investment objectives or it moves from style to style within the same objective.

Mutual Fund Distributions

From time to time the price of your mutual fund will fall. This is absolutely normal especially in cases when the letter “x”, “z”, or “e” stand behind the NAV’s value. This decrease is caused by the execution of distributions by the mutual fund and does not mean that you have lost any money.

Mutual Funds Turnover Ratio Definition

The turnover ratio presents the trading activity of a mutual fund usually during one year. Generally, high turnover ratios are an indicator of the high expenses of the fund.

Mutual Funds Prospectus Definition

Mutual funds are required by law to provide every potential investor with a prospectus. Additionally, an annual upgrade of the prospectus is obligatory, which have to be distributed among the fund’s existing investors.

What are Mutual Funds

What are Mutual Funds - an investment instrument that allows the accumulation of the money of several investors with the purpose of achieving a common financial objective is called a mutual fund.

Money Market Funds

Money Market Funds - a type of mutual funds that purchases short-term debt securities of banks, corporations, US Treasury Bills and agencies of the US government.

Index Fund

The index fund is a type of a mutual fund that mimics the movement of a stock market fund.

Expense Ratio

The expense ratio of a fund represents its operating expenses during one year, which is presented as a percentage of its average net assets. In the value of the operating expenses should be included distribution fees, management fees and etc.

Annual Return on Investment

Annual return represents the percentage change of an investment for one year, where the dividends, reinvestment of distributions and capital gains should be figured in.

Most Important Mutual Fund Terms

In order to become a successful mutual fund investor it is absolutely obligatory to know the meaning of the following mutual fund terms.

Lifecycle Funds

Lifecycle funds represent funds of funds that are usually offered by large companies. Lifecycle funds may be concentrated on the risk tolerance, which can vary from aggressive, moderate to conservative.

Closed-end Fund

A closed-end fund differs from a mutual fund in that that the letter allows for the purchase of new shares. That’s why mutual funds are characterized as open-ended.

Stock Market Ticker Symbols

Information about the securities is enclosed in the number of letters and the letters themselves. Ticker symbols are applied as a tool of obtaining information about a security and its movement.

How to Calculate Net Asset Value

Net Asset Value (NAV) is widely used when referring to mutual funds. In order to be able to make better investment choices you should be able to understand what stays behind the number of the net asset value and be capable of calculating it for yourself.

Treasury Inflation Protected Securities (TIPS)

When you want the enjoy the benefits of receiving a monthly income without saying goodbye to your principal than Treasury Inflation Protected Securities (TIPS) may be the financial instrument you are looking for.

Bond Mutual Fund

Bonds represent financial instruments that allow entities to borrow money from the public. This kind of loan is in the form of securities, which are mainly issued by the local or state governments, or big corporations like IBM.

Money Market Mutual Funds

Money market mutual funds’ existence dates back from the 1970s. They enjoy great popularity due to the low degree of risk and good short term returns.

Load Definition

A sales fee charged by some funds is called a load. Loads never present any benefit to your investment, so be sure to put your money in no-load mutual funds.