Saturday, May 20, 2000
Glossary of mutual fund terms
• Annualized rate of return: The one-year return of an investment based on its return for a certain period. It can be arrived at, for example, by taking a compounded effect over seven days and multiplying by 52.
• Capital gains distributions: Payments made to mutual fund shareholders that come from profits realized from the sale of various securities within the mutual fund's portfolio. Typically, these distributions are paid once a year at or near the end of the year.
• Expense ratio: The amount deducted from a mutual fund for operating expenses and management fees. It is expressed as a percentage of the fund's average net assets.
• Load: A sales charge levied by a mutual fund, the maximum being 8.5 percent of the shareholder's initial investment, which is equal to 9.3 percent of the net amount invested.
• Net asset value: The bottom line of a mutual fund from a per-share point of view. A fund's NAV is the market value of all the fund's total assets, minus its liabilities, divided by the total number of outstanding shares in the fund. A fund's NAV is calculated daily. The primary reason a fund's NAV fluctuates is because of changes in the market values of its holdings.
• Prospectus: A booklet that must be given to all mutual-fund investors that outlines the reason the mutual fund was created, who manages it, what its past performance has been, what its fees are, how to buy and redeem shares, and a host of other important information.
• Redeem: To buy back. Redeeming your fund shares is the same as selling them.
• Total return: The measurement of a fund's performance that includes the income received from dividends and interest, capital gains distributions and any unrealized capital gains or losses.
• Yield: The income per share that gets paid to mutual fund shareholders from the dividends and interest of a fund. Yields are expressed as a percentage of the offering price of the fund.
Source: 101 Mutual Fund FAQs, by Dian Vujovich
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