COMMON INVESTMENT TERMS EXPLAINED: Part 3


We’re back today with more common terms related to mutual funds. Take a look, and let us know if you have questions!

Index Fund: A fund intended to mimic the performance of a market index. In essence, it’s like owning a share of the entire market within that stock index.

Initial Public Offering (IPO): A closed-end fund’s first offering of shares in that fund. Remember that closed-end funds are similar to stocks in many ways. Initial stock offerings from public companies are also referred to as IPOs.

Liquidity: When an investment can be quickly converted to cash, it is said to have a high amount of liquidity. Mutual funds are quite liquid because the shares can be sold back to the fund the next business day.

Money Market Fund: A mutual fund which invests in short-term securities. Money market funds are very safe, since the investments they make are quite low risk. Many people use these in lieu of a savings account. Money market funds are also a common place to hold money between investments.

Mutual Fund: An investment company that buys a portfolio of securities and is managed by a professional investment adviser.

  • Mutual funds can be actively managed, where the manager creates a mix of investments to meet the fund’s stated objective. They can also be passively managed, in which case the manager would just be attempting to track the performance of a particular index.

Net Asset Value (NAV): The per-share value of a mutual fund. This is determined by subtracting the fund’s liabilities from its assets and holdings and then dividing by the number of shares outstanding.

Thanks for reading! We’ll be back soon with more terms for you to consider. As always, give us a holler if you have questions or want to chat about your own investment journey.

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