MUTUAL FUNDS
Mutual funds are almost the same as Unit Investment Trust Funds. The main difference is that if you participate with Mutual Funds, you are buying shares of the fund. With UITFs, you are buying a unit of participation. That means, if you have shares with a mutual fund, you have the rights to vote during the annual meeting of the fund.
A mutual fund can be an open-ended or a closed ended-fund. The board of directors (if organized as a corporation) or board of trustees (if organized as a trust) ensures that the fund is managed in the best interests of the fund’s investors and with hiring the fund manager and other service providers to the fund. The fund manager trades (buys and sells) the fund’s investments in accordance with the fund’s investment objective.
Both UITFs and Mutual Funds are good investment vehicles for people who have very limited time and funds to invest on securities. They are already a diversified portfolio of stocks and other investment vehicles like bonds and money market. Before investing, you have to consider the objective of the fund if it suits you. Take note that there is annual fees for the management of the funds. Early redemption fees may occur as well if you redeem your shares or participation after the minimum holding time of the fund.
