What is a 'Fund'

A fund is a source of money that will be allocated to a specific purpose. A fund can be established for any purpose whatsoever, whether it is a city government setting aside money to build a new civic center, a college setting aside money to award a scholarship, or an insurance company setting aside money to pay its customers' claims.

BREAKING DOWN 'Fund'

Individuals, businesses and governments all use funds to set aside money. Individuals might establish an emergency fund or rainy-day fund to pay for unforeseen expenses, or a trust fund to set aside money for a specific person.





Individual and institutional investors can also place money in different types of funds with the goal of earning money. Examples include mutual funds, which gather money from numerous investors and invest it in a diversified portfolio of assets, and hedge funds, which invest the assets of high-net-worth individuals in a way that is designed to earn above-market returns. Governments use funds, such as special revenue funds, to pay for specific public expenses.



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