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Financing Strategies - Mutual fund and Trust Companies

Mutual fund companies
Mutual funds raise funds from investors, pool the money and invest in stocks, bonds and other investments. Investors own shares that are proportionate to the amount of their investment. Mutual funds offer small investors the advantages of diversification and professional management.

  1. Structure
    Mutual funds are operated by investment companies that hire a professional investment manager to oversee the fund. Investors are charged a management fee.
  2. Regulation
    Mutual funds are regulated under the Investment Company Act of 1940, which requires them to register with the Securities and Exchange Commission.
  3. Money Market Mutual Funds
    These serve as an alternative to a bank deposit account that invests in short-term notes of high denomination and high quality. They often pay a higher rate of return than bank account. Unlike bank deposits, money market mutual funds are not insured even though they are regarded as risk free.

Trust companies
A trust company is a legal entity that acts as fiduciary, agent or trustee on behalf of a person or business entity for the purpose of administration, management and the eventual transfer of assets to a beneficiary.

The entity acts as a custodian for trusts, estates, custodial arrangements, asset management, stock transfer, beneficial ownership registration and other related arrangements. A trust company does not own the assets its customers assign to its management, but it may assume some legal obligation to take care of assets on behalf of other parties.

A trust company or trust department is usually a division or an associated company of a commercial bank. Trust companies often offer investment management and estate planning services.

Trust companies are regulated under state law.

Introduction
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