Mutual Funds

Laurie Frederiksen on

An investment club is, in many ways, a little cousin to a mutual fund.

I was having a discussion with one of our customers about NAV and he sent me some links to some interesting articles about the SEC regulations concerning mutual fund pricing.

One of them was this link to a chapter of a book. It is a really nice overview of Mutual Funds, their history, how they are managed, how they are marketed and the regulations that apply to them.

http://www.pli.edu/product_files/booksamples/610_sample6.pdf

The chapter starts with a brief history of how Mutual funds came to be and how they have changed over the years. It's interesting to see how various financial abuses shaped the current mutual fund regulations and produced the funds we have available to us today.

The chapter then describes how mutual funds are managed. It helps to understand the different roles of the players including the Investment advisor, the fund board of directors, the transfer agent, the underwriters, the auditors and the mutual fund company itself. If you've ever wanted to learn more about those terms, this is a good place to learn about them.

There is a brief discussion of how mutual funds are marketed. This is required reading for anyone investing in Mutual funds. It's important you understand the difference between things like Class A, Class B and Class C shares.

The chapter ends with a discussion of some of the regulations which currently apply to mutual funds.

Personally I find it as or more difficult to try and sort through actively managed mutual funds to try and find good ones than to sort through stocks. As an investment club investment they can bring along extra accounting issues which some may feel are more bother than they're worth to handle.

But I know a lot of people have no other options in their retirement program accounts. If that's you, I hope this writeup will give you an opportunity to learn more about what you're investing in.

Laurie Frederiksen
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