Mutual Fund

An open-end mutual fund, a public requested investment company (RIC), sells as many shares as investor demand requires. It pools money from investors and purchases securities. As money comes into the fund, the fund grows. If money flows out of the fund, the number of the fund's outstanding shares drops. Mutual funds are regulated by the SEC, where the funds are registered. Mutual funds are classified by their type of investments. The four largest categories of funds are money market funds, bond or fixed income funds, stock or equity funds and hybrid funds. Funds may also be categorized as index or actively-managed. In order to sell shares an investor usually sells the shares back to the fund. If an investor wishes to buy additional shares in a mutual fund, the investor must buy newly issued shares directly from the fund.