Protected Fund

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.

BREAKING DOWN '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 Guarantee Fund

    An investment in which the investor's principal is shielded from ...
  2. Structured Funds

    A fund that combines both equity and fixed-income products to ...
  3. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected ...
  4. Guaranteed Investment Fund - GIF

    A type of investment product offered by insurance companies that ...
  5. Equity Fund

    A mutual fund that invests principally in stocks. It can be actively ...
  6. Investment Fund

    A supply of capital belonging to numerous investors that is used ...
Related Articles
  1. Retirement

    Analyzing The Best Retirement Plans And Investment Options: Mutual Funds

    What they are: A professionally managed pool of stocks, bonds and/or other instruments that is divided into shares and sold to investors. Pros: Diversification; liquidity; simplicity; ...
  2. Investing

    Advising FAs: Explaining Mutual Funds to a Client

    More than 80 million people, or half of the households in America, invest in mutual funds. No matter what type of investor you are, there is bound to be a mutual fund that fits your style.
  3. Mutual Funds & ETFs

    Mutual Funds: Different Types Of Funds

    No matter what type of investor you are, there is bound to be a mutual fund that fits your style. According to the last count there are more than 10,000 mutual funds in North America! That means ...
  4. Retirement

    Should Balanced Funds Be Part Of Your Portfolio?

    Find out why you should include balanced funds in your portfolio, including the importance of customizability, diversification and professional management.
  5. Mutual Funds & ETFs

    The Benefits of Picking Mutual Funds Over Individual Stocks

    Learn about the advantages of investing in mutual funds rather than individual stocks, including the benefits of affordability, oversight and diversification.
  6. Mutual Funds

    What mutual funds are: Professionally managed pools of stocks, bonds and/or other instruments that are divided into shares and sold to investors. Pros: Diversification; liquidity; simplicity; ...
  7. Mutual Funds & ETFs

    When To Sell A Mutual Fund

    Unhappy with your mutual fund's returns and thinking of investing elsewhere? Read this article first.
  8. 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.
  9. Mutual Funds & ETFs

    A Mutual Funds Guide for Young Investors

    Learn how mutual funds work, why they are so popular and how younger investors can get started by putting mutual funds in their IRAs or 401(k)s.
  10. Investing Basics

    4 Expensive Mutual Fund Mistakes to Avoid

    Mutual funds are a good way to balance your asset allocation but there some potentially expensive pitfalls investors need to be aware of.
RELATED FAQS
  1. How do I calculate the loan-to-value ratio using Excel?

    Learn what a mutual fund and a money market fund are, and understand the differences between each and how they serve various ... Read Answer >>
  2. Do mutual funds pay dividends or interest?

    Learn how and why mutual funds pay interest or dividends, including the different funds and which types generate each type ... Read Answer >>
  3. Can mutual funds only hold stocks?

    Learn about which types of mutual funds consist of only stocks, which may include stocks in addition to other assets and ... Read Answer >>
  4. Do mutual funds invest only in stocks?

    Discover which types of mutual funds invest in only equities, or stocks, and which mutual funds also include investments ... Read Answer >>
  5. How do I judge a mutual fund's performance?

    Evaluate mutual fund performance utilizing resources such as Morningstar; compare the fund with others in its peer group ... Read Answer >>
  6. Where does a hedge fund get its money?

    Learn how a hedge fund is structured and how the managing partner of the fund goes about the process of finding and soliciting ... Read Answer >>
Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  3. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  4. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  5. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  6. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
Trading Center