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. Capital Gain

    1. An increase in the value of a capital asset (investment or ...
  2. Expense Ratio

    A measure of what it costs an investment company to operate a ...
  3. Fixed-Income Security

    An investment that provides a return in the form of fixed periodic ...
  4. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected ...
  5. Principal

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

    A type of pool investment that is similar to a mutual fund, but ...
Related Articles
  1. The Advantages Of Mutual Funds
    Mutual Funds & ETFs

    The Advantages Of Mutual Funds

  2. Mutual Funds Are Awesome - Except When ...
    Mutual Funds & ETFs

    Mutual Funds Are Awesome - Except When ...

  3. Pick The Winners At The Mutual Fund ...
    Mutual Funds & ETFs

    Pick The Winners At The Mutual Fund ...

  4. Mutual Fund Basics Tutorial
    Mutual Funds & ETFs

    Mutual Fund Basics Tutorial

comments powered by Disqus
Hot Definitions
  1. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  2. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  3. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  4. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  5. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  6. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
Trading Center