Mutual Funds Defined:
• Mutual funds are professionally managed funds, comprised of several investments. Mutual funds pool capital from several investors to buy an assortment of stocks, short-term money instruments, bonds and/or other securities. A mutual fund is somewhat of a conservative investment type, as a result of the security’s range of products offered—the investor is properly diversified.
• Mutual funds–in the United States– must be registered with the Securities and Exchange Commission; when registered the mutual fund is the overseen by a board of directors, if it is organized as a corporation or a board of trustees, if organized as a trust.
• The board of a mutual fund is charged with ensuring that the investment pool is managed in the best interests of the fund’s investors. In turn, the fund manager, also referred to as the fund sponsor or the fund’s management company, will actively trade (buy and sell) the fund’s pool of securities in accordance with the fund’s investment objective.
• So long as they comply with certain requirements established by the Internal Revenue Code, mutual funds are not taxed on income generated. In a specific sense, the fund must diversify its investments, limit ownership of voting securities, distribute income to their investors annually and earn the majority of their income through the investment in securities and currencies.
American Funds Defined:
• American Funds is a collection of 33 mutual funds, managed by the Capital Research and Management team—the research branch of the Capital Group Companies. This team serves as the primary investment arm to the 33 mutual funds grouped within the American Funds. The company; however, does not advertise its holdings or the fund itself. In fact, the American funds shun publicity, opting instead to rely on broker recommendations for private investment.
• The American Funds currently has over $1 trillion in assets under management, making it the third largest mutual fund in the United States—American Funds ranks only behind Fidelity and The Vanguard Group in regards to assets under management.