Mutual Funds and ETFs

A mutual fund is both an investment and a company.
Similar to how a share of AAPL represents Apple, Inc.
Buying Apple stock means buying part ownership of the company and its assets.
A mutual fund investor buys part ownership of the mutual fund company and its assets.
Apple is in the business of making smartphones and tablets.
A mutual fund company is in the business of making investments.
Mutual funds pool money from investors to buy securities, like stocks and bonds.
The value of a mutual fund depends on the performance of the securities it buys.
Buying a share of a mutual fund means buying the performance of its portfolio.

Definition: Net Asset Value (NAV) is a measure of a mutual fund's per-share market value.
Calculation:
$NAV = \frac{Market Value of Assets - Liabilities}{Shares Outstanding}$

Fee Structure:
- Operating expenses
- Front-end load
- Back-end load
- 12 b-1 charge
Fees must be disclosed in the prospectus.
Share classes have different fee combinations.

Mutual funds have operating costs.
These costs vary among funds.
All mutual funds have an expense ratio, also known as a management fee or operating expense.
This fee is deducted from the total assets of the fund before the share price is determined.
Example:
- A mutual fund is valued at $10 per share.
- It has a gross return of 10%, meaning a total investment return of $1 per share.
- Without fees, the fund share would be valued at $11.
- The fund manager deducts 1% in fees.
- The actual investment return is $0.89 instead of $1.
- After fees, the share is worth $10.89.

Front-end Load:
- When buying “A share” mutual funds, a commission is paid when purchasing the shares.
- This is also called a sales charge.
- A