How to Buy and Sell
Shares
You can purchase shares in some mutual funds by contacting
the fund directly. Other mutual fund shares are sold mainly
through brokers, banks, financial planners, or insurance
agents. All mutual funds will redeem (buy back) your shares
on any business day and must send you the payment within
seven days.
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The easiest way to determine the value of your shares is to
call the fund's toll-free number or visit its website. The
financial pages of major newspapers sometimes print the NAVs
for various mutual funds. When you buy shares, you pay the
current NAV per share plus any fee the fund assesses at the
time of purchase, such as a purchase sales load or other
type of purchase fee. When you sell your shares, the fund
will pay you the NAV minus any fee the fund assesses at the
time of redemption, such as a deferred (or back-end) sales
load or redemption fee. A fund's NAV goes up or down daily
as its holdings change in value.
Exchanging Shares
A "family of funds" is a group of mutual funds that share
administrative and distribution systems. Each fund in a
family may have different investment objectives and follow
different strategies.
Some funds offer exchange privileges within a family of
funds, allowing shareholders to transfer their holdings from
one fund to another as their investment goals or tolerance
for risk change. While some funds impose fees for exchanges,
most funds typically do not. To learn more about a fund's
exchange policies, call the fund's toll-free number, visit
its website, or read the "shareholder information" section
of the prospectus.
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Bear in mind that exchanges have tax consequences. Even if
the fund doesn't charge you for the transfer, you'll be
liable for any capital gain on the sale of your old shares —
or, depending on the circumstances, eligible to take a
capital loss. We'll discuss taxes in further detail below.
How Funds Can Earn Money for You
You can earn money from your investment in three ways:
1. Dividend Payments — A fund may earn income in the form of
dividends and interest on the securities in its portfolio.
The fund then pays its shareholders nearly all of the income
(minus disclosed expenses) it has earned in the form of
dividends.
2. Capital Gains Distributions — The price of the securities
a fund owns may increase. When a fund sells a security that
has increased in price, the fund has a capital gain. At the
end of the year, most funds distribute these capital gains
(minus any capital losses) to investors.
3. Increased NAV — If the market value of a fund's portfolio
increases after deduction of expenses and liabilities, then
the value (NAV) of the fund and its shares increases. The
higher NAV reflects the higher value of your investment.
With respect to dividend payments and capital gains
distributions, funds usually will give you a choice: the
fund can send you a check or other form of payment, or you
can have your dividends or distributions reinvested in the
fund to buy more shares (often without paying an additional
sales load).
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Factors to Consider
Thinking about your long-term investment strategies and
tolerance for risk can help you decide what type of fund is
best suited for you. But you should also consider the effect
that fees and taxes will have on your returns over time.
Degrees of Risk
All funds carry some level of risk. You may lose some or all
of the money you invest — your principal — because the
securities held by a fund go up and down in value. Dividend
or interest payments may also fluctuate as market conditions
change.
Before you invest, be sure to read a fund's prospectus and
shareholder reports to learn about its investment strategy
and the potential risks. Funds with higher rates of return
may take risks that are beyond your comfort level and are
inconsistent with your financial goals.
A Word About Derivatives
Derivatives are financial instruments whose performance is
derived, at least in part, from the performance of an
underlying asset, security, or index. Even small market
movements can dramatically affect their value, sometimes in
unpredictable ways.
There are many types of derivatives with many different
uses. A fund's prospectus will disclose whether and how it
may use derivatives. You may also want to call a fund and
ask how it uses these instruments.
Fees and Expenses
As with any business, running a mutual fund involves costs —
including shareholder transaction costs, investment advisory
fees, and marketing and distribution expenses. Funds pass
along these costs to investors by imposing fees and
expenses. It is important that you understand these charges
because they lower your returns.
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Some funds impose "shareholder fees" directly on investors
whenever they buy or sell shares. In addition, every fund
has regular, recurring, fund-wide "operating expenses."
Funds typically pay their operating expenses out of fund
assets — which means that investors indirectly pay these
costs.
SEC rules require funds to disclose both shareholder fees
and operating expenses in a "fee table" near the front of a
fund's prospectus. The lists below will help you decode the
fee table and understand the various fees a fund may impose:
Shareholder Fees
* Sales Charge (Load) on Purchases — the amount you pay when
you buy shares in a mutual fund. Also known as a "front-end
load," this fee typically goes to the brokers that sell the
fund's shares. Front-end loads reduce the amount of your
investment. For example, let's say you have $1,000 and want
to invest it in a mutual fund with a 5% front-end load. The
$50 sales load you must pay comes off the top, and the
remaining $950 will be invested in the fund. According to
NASD rules, a front-end load cannot be higher than 8.5% of
your investment.
* Purchase Fee — another type of fee that some funds charge
their shareholders when they buy shares. Unlike a front-end
sales load, a purchase fee is paid to the fund (not to a
broker) and is typically imposed to defray some of the
fund's costs associated with the purchase.
* Deferred Sales Charge (Load) — a fee you pay when you sell
your shares. Also known as a "back-end load," this fee
typically goes to the brokers that sell the fund's shares.
The most common type of back-end sales load is the
"contingent deferred sales load" (also known as a "CDSC" or
"CDSL"). The amount of this type of load will depend on how
long the investor holds his or her shares and typically
decreases to zero if the investor holds his or her shares
long enough.
* Redemption Fee — another type of fee that some funds
charge their shareholders when they sell or redeem shares.
Unlike a deferred sales load, a redemption fee is paid to
the fund (not to a broker) and is typically used to defray
fund costs associated with a shareholder's redemption.
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* Exchange Fee — a fee that some funds impose on
shareholders if they exchange (transfer) to another fund
within the same fund group or "family of funds."
* Account fee — a fee that some funds separately impose on
investors in connection with the maintenance of their
accounts. For example, some funds impose an account
maintenance fee on accounts whose value is less than a
certain dollar amount.
Annual Fund Operating Expenses
* Management Fees — fees that are paid out of fund assets to
the fund's investment adviser for investment portfolio
management, any other management fees payable to the fund's
investment adviser or its affiliates, and administrative
fees payable to the investment adviser that are not included
in the "Other Expenses" category (discussed below).
* Distribution [and/or Service] Fees ("12b-1" Fees) — fees
paid by the fund out of fund assets to cover the costs of
marketing and selling fund shares and sometimes to cover the
costs of providing shareholder services. "Distribution fees"
include fees to compensate brokers and others who sell fund
shares and to pay for advertising, the printing and mailing
of prospectuses to new investors, and the printing and
mailing of sales literature. "Shareholder Service Fees" are
fees paid to persons to respond to investor inquiries and
provide investors with information about their investments.
* Other Expenses — expenses not included under "Management
Fees" or "Distribution or Service (12b-1) Fees," such as any
shareholder service expenses that are not already included
in the 12b-1 fees, custodial expenses, legal and accounting
expenses, transfer agent expenses, and other administrative
expenses.
* Total Annual Fund Operating Expenses ("Expense Ratio") —
the line of the fee table that represents the total of all
of a fund's annual fund operating expenses, expressed as a
percentage of the fund's average net assets. Looking at the
expense ratio can help you make comparisons among funds.
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A Word About
"No-Load" Funds
Some funds call themselves "no-load." As the name implies,
this means that the fund does not charge any type of sales
load. But, as discussed above, not every type of shareholder
fee is a "sales load." A no-load fund may charge fees that
are not sales loads, such as purchase fees, redemption fees,
exchange fees, and account fees. No-load funds will also
have operating expenses.
Be sure to review carefully the fee tables of any funds
you're considering, including no-load funds. Even small
differences in fees can translate into large differences in
returns over time. For example, if you invested $10,000 in a
fund that produced a 10% annual return before expenses and
had annual operating expenses of 1.5%, then after 20 years
you would have roughly $49,725. But if the fund had expenses
of only 0.5%, then you would end up with $60,858 — an 18%
difference.
The SEC's online, interactive Mutual Fund Cost Calculator
can help you understand the impact that many types of fees
and expenses can have over time. It takes only minutes to
compare the costs of different mutual funds.
A Word About Breakpoints
Some mutual funds that charge front-end sales loads will
charge lower sales loads for larger investments. The
investment levels required to obtain a reduced sales load
are commonly referred to as "breakpoints."
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The SEC does not require a fund to offer breakpoints in the
fund's sales load. But, if breakpoints exist, the fund must
disclose them. In addition, a NASD member brokerage firm
should not sell you shares of a fund in an amount that is
"just below" the fund's sales load breakpoint simply to earn
a higher commission.
Each fund company establishes its own formula for how they
will calculate whether an investor is entitled to receive a
breakpoint. For that reason, it is important to seek out
breakpoint information from your financial advisor or the
fund itself. You'll need to ask how a particular fund
establishes eligibility for breakpoint discounts, as well as
what the fund's breakpoint amounts are. NASD's Mutual Fund
Breakpoint Search Tool can help you determine whether you're
entitled to breakpoint discounts.
Classes of Funds
Many mutual funds offer more than one class of shares. For
example, you may have seen a fund that offers "Class A" and
"Class B" shares. Each class will invest in the same "pool"
(or investment portfolio) of securities and will have the
same investment objectives and policies. But each class will
have different shareholder services and/or distribution
arrangements with different fees and expenses. As a result,
each class will likely have different performance results.
A multi-class structure offers investors the ability to
select a fee and expense structure that is most appropriate
for their investment goals (including the time that they
expect to remain invested in the fund). Here are some key
characteristics of the most common mutual fund share classes
offered to individual investors:
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* Class A Shares — Class A shares typically impose a
front-end sales load. They also tend to have a lower 12b-1
fee and lower annual expenses than other mutual fund share
classes. Be aware that some mutual funds reduce the
front-end load as the size of your investment increases. If
you're considering Class A shares, be sure to inquire about
breakpoints.
* Class B Shares — Class B shares typically do not have a
front-end sales load. Instead, they may impose a contingent
deferred sales load and a 12b-1 fee (along with other annual
expenses). Class B shares also might convert automatically
to a class with a lower 12b-1 fee if the investor holds the
shares long enough.
* Class C Shares — Class C shares might have a 12b-1 fee,
other annual expenses, and either a front- or back-end sales
load. But the front- or back-end load for Class C shares
tends to be lower than for Class A or Class B shares,
respectively. Unlike Class B shares, Class C shares
generally do not convert to another class. Class C shares
tend to have higher annual expenses than either Class A or
Class B shares.
Tax Consequences
When you buy and hold an individual stock or bond, you must
pay income tax each year on the dividends or interest you
receive. But you won't have to pay any capital gains tax
until you actually sell and unless you make a profit.
Mutual funds are different. When you buy and hold mutual
fund shares, you will owe income tax on any ordinary
dividends in the year you receive or reinvest them. And, in
addition to owing taxes on any personal capital gains when
you sell your shares, you may also have to pay taxes each
year on the fund's capital gains. That's because the law
requires mutual funds to distribute capital gains to
shareholders if they sell securities for a profit that can't
be offset by a loss.
Tax Exempt Funds
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If you invest in a tax-exempt fund — such as a municipal
bond fund — some or all of your dividends will be exempt
from federal (and sometimes state and local) income tax. You
will, however, owe taxes on any capital gains.
Bear in mind that if you receive a capital gains
distribution, you will likely owe taxes — even if the fund
has had a negative return from the point during the year
when you purchased your shares. For this reason, you should
call the fund to find out when it makes distributions so you
won't pay more than your fair share of taxes. Some funds
post that information on their websites.
SEC rules require mutual funds to disclose in their
prospectuses after-tax returns. In calculating after-tax
returns, mutual funds must use standardized formulas similar
to the ones used to calculate before-tax average annual
total returns. You'll find a fund's after-tax returns in the
"Risk/Return Summary" section of the prospectus. When
comparing funds, be sure to take taxes into account.
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Avoiding Common Pitfalls
If you decide to invest in mutual funds, be sure to obtain
as much information about the fund before you invest. And
don't make assumptions about the soundness of the fund based
solely on its past performance or its name.
Sources of Information
Prospectus
When you purchase shares of a mutual fund, the fund must
provide you with a prospectus. But you can — and should —
request and read a fund's prospectus before you invest. The
prospectus is the fund's selling document and contains
valuable information, such as the fund's investment
objectives or goals, principal strategies for achieving
those goals, principal risks of investing in the fund, fees
and expenses, and past performance. The prospectus also
identifies the fund's managers and advisers and describes
how to purchase and redeem fund shares.
While they may seem daunting at first, mutual fund
prospectuses contain a treasure trove of valuable
information. The SEC requires funds to include specific
categories of information in their prospectuses and to
present key data (such as fees and past performance) in a
standard format so that investors can more easily compare
different funds.
Here's some of what you'll find in mutual fund prospectuses:
* Date of Issue — The date of the prospectus should appear
on the front cover. Mutual funds must update their
prospectuses at least once a year, so always check to make
sure you're looking at the most recent version.
* Risk/Return Bar Chart and Table — Near the front of the
prospectus, right after the fund's narrative description of
its investment objectives or goals, strategies, and risks,
you'll find a bar chart showing the fund's annual total
returns for each of the last 10 years (or for the life of
the fund if it is less than 10 years old). All funds that
have had annual returns for at least one calendar year must
include this chart.
Except in limited circumstances, funds also must include a
table that sets forth returns — both before and after taxes
— for the past 1-, 5-, and 10-year periods. The table will
also include the returns of an appropriate broad-based index
for comparison purposes. Here's what the table will look
like:
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1-year 5-year 10-year
Return before taxes ___% ___% ___%
Return after taxes
on distributions ___% ___% ___%
Return after taxes
on distributions
and sale of fund shares
___% ___%
___%
Index
(reflects no deductions for
[fees, expenses, or taxes])
___%
___%
___%
Note: Be sure to read any footnotes or accompanying
explanations to make sure that you fully understand the data
the fund provides in the bar chart and table. Also, bear in
mind that the bar chart and table for a multiple-class fund
(that offers more than one class of fund shares in the
prospectus) will typically show performance data and returns
for only one class.
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* Fee Table — Following the performance bar chart and annual
returns table, you'll find a table that describes the fund's
fees and expenses. These include the shareholder fees and
annual fund operating expenses described in greater detail
above. The fee table includes an example that will help you
compare costs among different funds by showing you the costs
associated with investing a hypothetical $10,000 over a 1-,
3-, 5-, and 10-year period.
* Financial Highlights — This section, which generally
appears towards the back of the prospectus, contains audited
data concerning the fund's financial performance for each of
the past 5 years. Here you'll find net asset values (for
both the beginning and end of each period), total returns,
and various ratios, including the ratio of expenses to
average net assets, the ratio of net income to average net
assets, and the portfolio turnover rate.
Profile
Some mutual funds also furnish investors with a "profile,"
which summarizes key information contained in the fund's
prospectus, such as the fund's investment objectives,
principal investment strategies, principal risks,
performance, fees and expenses, after-tax returns, identity
of the fund's investment adviser, investment requirements,
and other information.
Statement of Additional Information ("SAI")
Also known as "Part B" of the registration statement, the
SAI explains a fund's operations in greater detail than the
prospectus — including the fund's financial statements and
details about the history of the fund, fund policies on
borrowing and concentration, the identity of officers,
directors, and persons who control the fund, investment
advisory and other services, brokerage commissions, tax
matters, and performance such as yield and average annual
total return information. If you ask, the fund must send you
an SAI. The back cover of the fund's prospectus should
contain information on how to obtain the SAI.
Shareholder Reports
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A mutual fund also must provide shareholders with annual and
semi-annual reports within 60 days after the end of the
fund's fiscal year and 60 days after the fund's fiscal
mid-year. These reports contain a variety of updated
financial information, a list of the fund's portfolio
securities, and other information. The information in the
shareholder reports will be current as of the date of the
particular report (that is, the last day of the fund's
fiscal year for the annual report, and the last day of the
fund's fiscal mid-year for the semi-annual report).
Investors can obtain all of these documents by:
* Calling or writing to the fund (all mutual funds have
toll-free telephone numbers);
* Visiting the fund's website;
* Contacting a broker that sells the fund's shares;
* Searching the SEC's EDGAR database and downloading the
documents for free; or
* Contacting the SEC's Office of Public Reference by
telephone at (202) 551-8090, by fax at (202) 942-9001 (fax),
or by email at publicinfo@sec.gov. Please be aware that we
charge $0.24 per page for photocopying.
Past Performance
A fund's past performance is not as important as you might
think. Advertisements, rankings, and ratings often emphasize
how well a fund has performed in the past. But studies show
that the future is often different. This year's "number one"
fund can easily become next year's below average fund.
Be sure to find out how long the fund has been in existence.
Newly created or small funds sometimes have excellent
short-term performance records. Because these funds may
invest in only a small number of stocks, a few successful
stocks can have a large impact on their performance. But as
these funds grow larger and increase the number of stocks
they own, each stock has less impact on performance. This
may make it more difficult to sustain initial results.
While past performance does not necessarily predict future
returns, it can tell you how volatile (or stable) a fund has
been over a period of time. Generally, the more volatile a
fund, the higher the investment risk. If you'll need your
money to meet a financial goal in the near-term, you
probably can't afford the risk of investing in a fund with a
volatile history because you will not have enough time to
ride out any declines in the stock market.
Looking Beyond a Fund's Name
Don't assume that a fund called the "XYZ Stock Fund" invests
only in stocks or that the "Martian High-Yield Fund" invests
only in the securities of companies headquartered on the
planet Mars. The SEC requires that any mutual fund with a
name suggesting that it focuses on a particular type of
investment must invest at least 80% of its assets in the
type of investment suggested by its name. But funds can
still invest up to one-fifth of their holdings in other
types of securities — including securities that you might
consider too risky or perhaps not aggressive enough.
Bank Products versus Mutual Funds
Many banks now sell mutual funds, some of which carry the
bank's name. But mutual funds sold in banks, including money
market funds, are not bank deposits. As a result, they are
not federally insured by the Federal Deposit Insurance
Corporation (FDIC).
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Money Market Matters
Don't confuse a "money market fund" with a "money market
deposit account." The names are similar, but they are
completely different:
* A money market fund is a type of mutual fund. It is not
guaranteed or FDIC insured. When you buy shares in a money
market fund, you should receive a prospectus.
* A money market deposit account is a bank deposit. It is
guaranteed and FDIC insured. When you deposit money in a
money market deposit account, you should receive a Truth in
Savings form.
If You Have
Problems
If you encounter a problem with your mutual fund, you can
send us your complaint using our online complaint form. You
can also reach us by regular mail at:
Securities and Exchange Commission
Office of Investor Education and Assistance
100 F Street, N.E.
Washington, D.C. 20549-0213
For more information about investing wisely and avoiding
fraud, please check out the Investor Information section of
our website.
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Glossary of
Key Mutual Fund Terms
12b-1 Fees — fees paid by the fund out of fund assets to
cover the costs of marketing and selling fund shares and
sometimes to cover the costs of providing shareholder
services. "Distribution fees" include fees to compensate
brokers and others who sell fund shares and to pay for
advertising, the printing and mailing of prospectuses to new
investors, and the printing and mailing of sales literature.
"Shareholder Service Fees" are fees paid to persons to
respond to investor inquiries and provide investors with
information about their investments.
Account Fee — a fee that some funds separately impose on
investors for the maintenance of their accounts. For
example, accounts below a specified dollar amount may have
to pay an account fee.
Back-end Load — a sales charge (also known as a "deferred
sales charge") investors pay when they redeem (or sell)
mutual fund shares, generally used by the fund to compensate
brokers.
Classes — different types of shares issued by a single fund,
often referred to as Class A shares, Class B shares, and so
on. Each class invests in the same "pool" (or investment
portfolio) of securities and has the same investment
objectives and policies. But each class has different
shareholder services and/or distribution arrangements with
different fees and expenses and therefore different
performance results.
Closed-End Fund — a type of investment company that does not
continuously offer its shares for sale but instead sells a
fixed number of shares at one time (in the initial public
offering) which then typically trade on a secondary market,
such as the New York Stock Exchange or the Nasdaq Stock
Market. Legally known as a "closed-end company."
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Contingent Deferred Sales Load — a type of back-end load,
the amount of which depends on the length of time the
investor held his or her shares. For example, a contingent
deferred sales load might be (X)% if an investor holds his
or her shares for one year, (X-1)% after two years, and so
on until the load reaches zero and goes away completely.
Conversion — a feature some funds offer that allows
investors to automatically change from one class to another
(typically with lower annual expenses) after a set period of
time. The fund's prospectus or profile will state whether a
class ever converts to another class.
Deferred Sales Charge — see "back-end load" (above).
Distribution Fees — fees paid out of fund assets to cover
expenses for marketing and selling fund shares, including
advertising costs, compensation for brokers and others who
sell fund shares, and payments for printing and mailing
prospectuses to new investors and sales literature
prospective investors. Sometimes referred to as "12b-1
fees."
Exchange Fee — a fee that some funds impose on shareholders
if they exchange (transfer) to another fund within the same
fund group.
Exchange-Traded Funds — a type of an investment company
(either an open-end company or UIT) whose objective is to
achieve the same return as a particular market index. ETFs
differ from traditional open-end companies and UITs,
because, pursuant to SEC exemptive orders, shares issued by
ETFs trade on a secondary market and are only redeemable
from the fund itself in very large blocks (blocks of 50,000
shares for example).
Expense Ratio — the fund's total annual operating expenses
(including management fees, distribution (12b-1) fees, and
other expenses) expressed as a percentage of average net
assets.
Front-end Load — an upfront sales charge investors pay when
they purchase fund shares, generally used by the fund to
compensate brokers. A front-end load reduces the amount
available to purchase fund shares.
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Index Fund — describes a type of mutual fund or Unit
Investment Trust (UIT) whose investment objective typically
is to achieve the same return as a particular market index,
such as the S&P 500 Composite Stock Price Index, the Russell
2000 Index, or the Wilshire 5000 Total Market Index.
Investment Adviser — generally, a person or entity who
receives compensation for giving individually tailored
advice to a specific person on investing in stocks, bonds,
or mutual funds. Some investment advisers also manage
portfolios of securities, including mutual funds.
Investment Company — a company (corporation, business trust,
partnership, or limited liability company) that issues
securities and is primarily engaged in the business of
investing in securities. The three basic types of investment
companies are mutual funds, closed-end funds, and unit
investment trusts.
Load — see "Sales Charge."
Management Fee — fee paid out of fund assets to the fund's
investment adviser or its affiliates for managing the fund's
portfolio, any other management fee payable to the fund's
investment adviser or its affiliates, and any administrative
fee payable to the investment adviser that are not included
in the "Other Expenses" category. A fund's management fee
appears as a category under "Annual Fund Operating Expenses"
in the Fee Table.
Market Index — a measurement of the performance of a
specific "basket" of stocks considered to represent a
particular market or sector of the U.S. stock market or the
economy. For example, the Dow Jones Industrial Average (DJIA)
is an index of 30 "blue chip" U.S. stocks of industrial
companies (excluding transportation and utility companies).
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Mutual Fund — the common name for an open-end investment
company. Like other types of investment companies, mutual
funds pool money from many investors and invest the money in
stocks, bonds, short-term money-market instruments, or other
securities. Mutual funds issue redeemable shares that
investors purchase directly from the fund (or through a
broker for the fund) instead of purchasing from investors on
a secondary market.
NAV (Net Asset Value) — the value of the fund's assets minus
its liabilities. SEC rules require funds to calculate the
NAV at least once daily. To calculate the NAV per share,
simply subtract the fund's liabilities from its assets and
then divide the result by the number of shares outstanding.
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No-load Fund — a fund that does not charge any type of sales
load. But not every type of shareholder fee is a "sales
load," and a no-load fund may charge fees that are not sales
loads. No-load funds also charge operating expenses.
Open-End Company — the legal name for a mutual fund. An
open-end company is a type of investment company
Operating Expenses — the costs a fund incurs in connection
with running the fund, including management fees,
distribution (12b-1) fees, and other expenses.
Portfolio — an individual's or entity's combined holdings of
stocks, bonds, or other securities and assets.
Profile — summarizes key information about a mutual fund's
costs, investment objectives, risks, and performance.
Although every mutual fund has a prospectus, not every
mutual fund has a profile.
Prospectus — describes the mutual fund to prospective
investors. Every mutual fund has a prospectus. The
prospectus contains information about the mutual fund's
costs, investment objectives, risks, and performance. You
can get a prospectus from the mutual fund company (through
its website or by phone or mail). Your financial
professional or broker can also provide you with a copy.
Purchase Fee — a shareholder fee that some funds charge when
investors purchase mutual fund shares. Not the same as (and
may be in addition to) a front-end load.
Redemption Fee — a shareholder fee that some funds charge
when investors redeem (or sell) mutual fund shares.
Redemption fees (which must be paid to the fund) are not the
same as (and may be in addition to) a back-end load (which
is typically paid to a broker). The SEC generally limits
redemption fees to 2%.
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Sales Charge (or "Load") — the amount that investors pay
when they purchase (front-end load) or redeem (back-end
load) shares in a mutual fund, similar to a commission. The
SEC's rules do not limit the size of sales load a fund may
charge, but NASD rules state that mutual fund sales loads
cannot exceed 8.5% and must be even lower depending on other
fees and charges assessed.
Shareholder Service Fees — fees paid to persons to respond
to investor inquiries and provide investors with information
about their investments. See also "12b-1 fees."
Statement of Additional Information (SAI) — conveys
information about an open- or closed-end fund that is not
necessarily needed by investors to make an informed
investment decision, but that some investors find useful.
Although funds are not required to provide investors with
the SAI, they must give investors the SAI upon request and
without charge. Also known as "Part B" of the fund's
registration statement.
Total Annual Fund Operating Expense — the total of a fund's
annual fund operating expenses, expressed as a percentage of
the fund's average net assets. You'll find the total in the
fund's fee table in the prospectus.
Unit Investment Trust (UIT) — a type of investment company
that typically makes a one-time "public offering" of only a
specific, fixed number of units. A UIT will terminate and
dissolve on a date established when the UIT is created
(although some may terminate more than fifty years after
they are created). UITs do not actively trade their
investment portfolios.