Protected Fund

AAA

DEFINITION of 'Protected Fund'

A type of mutual fund that guarantees an investor at least the initial investment, plus any capital gains, if it is held for the contractual term. The idea behind this type of fund is that you will be exposed to market returns because the fund is able to invest in the stock market, but you will have the safety of the guaranteed principal.

INVESTOPEDIA EXPLAINS 'Protected Fund'

The initial investment is protected by an insurance policy in case the fund is unable to pay the investor back his or her principal. The initial investment can only be paid back after the guarantee period is over; if the investor sells before this period, he/she is subject to the current value of the fund and any losses that may arise. This type of fund tends to have higher expense ratios than other types of mutual funds.

While protected funds state that you will be guaranteed at least your original investment in addition to being exposed to market returns, these funds are often heavily invested in fixed-income securities and have less weighting in the stock market.

RELATED TERMS
  1. Principal

    1. The amount borrowed or the amount still owed on a loan, separate ...
  2. Segregated Fund

    A type of pool investment that is similar to a mutual fund, but ...
  3. Expense Ratio

    A measure of what it costs an investment company to operate a ...
  4. Capital Gain

    1. An increase in the value of a capital asset (investment or ...
  5. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected ...
  6. Fixed-Income Security

    An investment that provides a return in the form of fixed periodic ...
RELATED FAQS
  1. How do waivers, reimbursements and recoupments affect a fund's expense ratio?

    Waivers, reimbursements and recoupments can initially serve to keep a fund's expense ratio lower than it would be otherwise. ... Read Full Answer >>
  2. What are some popular mutual funds that give exposure to the drugs sector?

    The pharmaceutical industry has experienced outstanding growth in the 10 years leading up to 2015, consistently outperforming ... Read Full Answer >>
  3. What can cause the rate of return to be negative?

    Several factors can cause an investment to have a negative rate of return. Poor performance of a company or companies, turmoil ... Read Full Answer >>
  4. What information should I focus on in my mutual fund's prospectus?

    The U.S. Securities and Exchange Commission (SEC) requires investment companies to provide potential and current investors ... Read Full Answer >>
  5. How can I get a free mutual fund prospectus?

    Mutual funds are sold via prospectus, as mandated by the Securities Act of 1933. The prospectus document outlines many features ... Read Full Answer >>
  6. Is there an index for tracking mid-cap stocks?

    There are several indexes for tracking mid-cap stocks. The most widely referenced is the S&P Mid-Cap 400, but others ... Read Full Answer >>
Related Articles
  1. Mutual Funds & ETFs

    The Advantages Of Mutual Funds

    Learn how to get diversification, liquidity and professional management at an affordable price.
  2. Mutual Funds & ETFs

    Mutual Funds Are Awesome - Except When They're Not

    This investment is very popular, but that doesn't mean it comes without risk.
  3. Mutual Funds & ETFs

    Pick The Winners At The Mutual Fund Track!

    For both mutual funds and racehorses, there's no surefire way to pick a winner.
  4. Mutual Funds & ETFs

    Mutual Fund Basics Tutorial

    Learn about the basics - and the pitfalls - of investing in mutual funds.
  5. Mutual Funds & ETFs

    Pros & Cons Of Bond Funds Vs. Bond ETFs

    Understanding the pros and cons of bond funds and bond ETFs will help you choose the instrument that is best for building your diversified bond portfolio.
  6. Mutual Funds & ETFs

    How Janus Capital Makes Money

    Before investing in Janus, it is prudent to understand how it makes money and what costs detract from shareholder wealth.
  7. Professionals

    Mutual Funds: How Many is Too Many?

    How many mutual funds are too many when it comes to a well diversified portfolio?
  8. Investing Basics

    Understanding Redemption

    In the investing world, redemption refers to cashing out the value of bonds or mutual funds.
  9. Mutual Funds & ETFs

    How To Mimic A Hedge Fund Strategy

    Hedge fund replication strategies are beneficial to individual investors who would like hedge fund-like returns without the drawbacks.
  10. Investing Basics

    What is an Index?

    An index is a statistical means of calculating a change in an economy or market.

You May Also Like

Hot Definitions
  1. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  2. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  3. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
  4. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
  5. Wash Trading

    The process of buying shares of a company through one broker while selling shares through a different broker. Wash trading ...
Trading Center