Flow of Funds: Overview of the Mutual Fund Market

Mutual Fund Shares

The Most Popular Collective Investment

Open-end mutual funds are financial products designed for individual investors (households).

Flow of funds: Overview of the Mutual Fund Market

These funds issue and redeem stock on demand at net asset value at the close of the day.

There are money market funds, bond funds, and stock funds.

Different Kinds of Stock Mutual Funds

Within these categories there are many varieties of funds.

For example, there are funds that invest in:

growth stocks, value stocks, high-dividend stocks, mid-cap stocks, large-cap stocks, small-cap stocks, index funds, global international funds, specific country funds, emerging market funds, and funds specializing in specific sectors, such as automotive, technology, baking, air transportation, health care, utilities, and so forth.

Money Market Mutual Funds Compete With Banks

Money market mutual funds are different from the other types of mutual funds, not only in the nature of their portfolios (short-term commercial paper and government securities), but also by the way that profits are distributed.

Mutual funds: investments for the masses Mutual funds, like baseball, cater to the masses.

Money market mutual funds distribute profits daily as fractional shares so that the net asset value of the fund always stays at one dollar.

Other mutual funds allow net asset value to fluctuate and distribute cash dividends at longer intervals.

Funding Corporations

Money market mutual funds also have funding corporations as major buyers.

Funding corporations are financial entities associated with foreign banks or non bank holding companies, and custodial accounts for reinvested collateral associated with securities lending operations.

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