Open End Mutual Funds Tutorial

Investment companies - including open end mutual funds are covered on the Series 6 and Series 7 exams.

“What is a Mutual Fund?”

A Mutual Fund (also called “Open End” Funds) is a company that invests money for their
shareholders. They usually offer strong diversification and are managed professionally. They
are called “Open End” because they are always issuing new shares of their fund. There is no
secondary market. An Agent (acting as a broker) representing a Mutual Fund will sell shares
of a fund but the transaction is facilitated by the fund company itself. For instance, if you want
to buy a mutual fund offered by “Fidelity Mutual Funds”, you must purchase it through an
Agent who represents them directly. You can’t just call any broker and buy Funds the way you
buy stock. There are thousands of different funds. You can buy a fund that fits your
objectives.

Mutual funds that have blue chip stocks, penny stocks, bonds or a mix in their portfolio is still considered an open end fund and the price will not be set until all the securities have settled their value at the end of the day. There are also other price consideration issues such as:

Sales Charge - what the fund charges to buy or perhaps when sold. There are also no-load funds where a sales fee is not charged.

Redemption Fee - Some open end mutual funds will charge a fee to redeem the shares of the fund. Many times this fee is in place when the buying sales charge is low or there is no sales charge going in.

Some types of funds include:

INCOME FUND - Specializing in buying stock in established companies (IBM, Philip Morris
etc.) or Bonds that generate interest income. These funds will normally pay good dividends
because they are receiving income from the investments themselves.

GROWTH FUND - Invested in emerging or growth companies. The fund buys companies
that they feel have good potential in the future. These funds, although low paying with respect
to dividends, have the greater potential to increase in share value.

SECTOR FUND - Invests in a particular sector or industry such as: Energy, Technology or
Internet only. These funds are less predictable since their performance is solely based on the
performance of that particular sector of the market.

“How do I get a job as a Mutual Fund Agent?” and other employment answers - including Series 6 or Series 7 Sponsorship:

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