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. Guaranteed Investment Fund - GIF

    A type of investment product offered by insurance companies that ...
  4. Investment Fund

    A supply of capital belonging to numerous investors that is used ...
  5. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected ...
  6. Equity Fund

    A mutual fund that invests principally in stocks. It can be actively ...
Related Articles
  1. Financial Advisor

    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.
  2. Investing

    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.
  3. Managing Wealth

    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.
  4. Investing

    When To Sell A Mutual Fund

    Unhappy with your mutual fund's returns and thinking of investing elsewhere? Read this article first.
  5. Investing

    Mutual Funds Are Awesome - Except When They're Not

    This investment is very popular, but that doesn't mean it comes without risk.
  6. Financial Advisor

    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.
  7. Investing

    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.
  8. Financial Advisor

    5 Characteristics of Strong Mutual Fund Shares

    Discover some of the basic characteristics shared by good mutual funds that investors can use to help them in selecting funds.
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. Why is it that when investors realize returns on a mutual fund, its price tends to ...

    Mutual funds have been in existence since 1924, when the first open-ended mutual fund was created. Since then, the market ... Read Answer >>
Hot Definitions
  1. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  2. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  3. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  4. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  5. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
  6. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
Trading Center