so what the proper definition of a mutual fund?
Open ended Mutual Fund is a type of fund where investors can be anyone from the public and not a accredited investors as that of hedge fund.
is the model applicable in a developing settings like in Africa?
is very short and clearly
Yes, it is easy to understand..
open ended mutual funds are the funds which are available to investors over the year.Anytime they can buy these funds from the market,it means there is no specific date mentioned by the mutual fund company for buying.
Great and easy to understand.
All the financial resources of a firm, such as cash in hand, bank balance, accounts receivable.
what is financial fund
Let's say Pete over here thinks he is a pretty good investor.
So what he does is-
or he has an idea that says:
"Look, I'm going to create a corporation,
and I'm going to get a bunch of people
to contribute money to that corporation
and then I'll manage that money.
And then maybe I'll take a little fee for myself
so that I can, maybe, hire some analists
or get some computers, or get some office space."
So what he does is he sets up a corporation.
Let's say he sets up a corporation right over here,
and let's say the first way he sets up the corporation is that it has 4 shares.
And I'm making the number really small just to make the drawing and the math easy
This wouldn't be realistic, normally it would be something in the 100s or 1000s of shares
or maybe even more than that.
But let's say that it has 4 shares, and all of the shares are owned by Pete, initially
Just to simplify the explanation.
And he puts in $400 into this corporation.
So another way to think about it, in exchange of him putting $400 into this corporation,
he gets 4 shares, or each share is worth $100.
Each of these shares, right over here.
So what he does is he registers this corporation, and I'm talking about a US-specific case
but there are similar types of organizations in other countries
He registers this organization right over here with the US SEC
Security and Exchange Commission, and he also registers himself with the SEC
or even better, he registers a management company that he runs with the SEC.
So let's call it Pete Inc. It's a corporation he starts off that he also registers with the SEC.
And when he registers with the SEC he tells them
"Look. This company over here, we're going to issue more shares, for more people to contribute money
And I'm going to manage this money right over here, and I'm just going to take a percentage of the total
assets under management"
Sometimes you'll just see AUM used, that just means Assets Under Management
That will go to Pete Inc. every year, for figuring out the best place to invest this money.
And it's usually on the order of 1%, sometimes a little bit less, sometimes a little bit more.
Right now with only $400 under management, it would only be about $4/year
But since he registered with the SEC, he can call himself a mutual fund,
and he can solicit funds from the public.
So it is a mutual fund, he has jumped through all the hoops that the SEC sets up for him,
so he can market himself as some type of great fund manager,
We don't know if that's true or not,
and he can also solicit funds from the public.
So from the public
And we're going to see in future videos there are other funds, especially hedge funds,
that one, they can't market, and they can't take funds from the public.
Those can only take funds from certain types of sophisticated investors.
and what happens in Pete's fund, and this is going to be an open ended mutual fund
that we're showing here, and most mutual funds are like that.
Let's say Sal comes along, he likes Pete's marketing materials, and says
"Hey! I want Pete to manage my money, too"
So sal goes and gives $100, and says "Pete, give me a share"
So Pete creates another share right over here, he gives it to Sal,
That's me, so I get one share, and in exchange I gave $100 to the fund.
So now the fund has $500.
So this is another $100 right over here
And now Pete's annual fee is going to be 1% of this whole thing, or $5/year
And if this whole thing grows, let's say this whole thing doubles,
From $500, let's say it goes to $1000, then that $1000 is now essentially split among these 5 shares now.
So all of the people will essentially have their money doubled
minus whatever Pete's expenses are.
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