mutual fund

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A financial institution which holds shares on behalf of investors. In the UK these are called unit trusts. Investors buy shares, or ‘units’ in the fund, which uses their money to buy shares in companies. An investor selling back the units gets the proceeds of selling a fraction of the fund's portfolio. A mutual fund's management benefits from appreciation of the shares the fund holds only to the extent that its management charges are a percentage of the market value of its portfolio.

Subjects: Economics.

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