Today's Mutual Fund Industry
  1. Overview Of The Mutual Fund Industry
  2. History Of The Mutual Fund
  3. How A Mutual Fund Works
  4. Today's Mutual Fund Industry
  5. Fund Investment Qualities
  6. Fund Investment Quality Scorecard (FIQS)

Today's Mutual Fund Industry

By Richard Loth (Contact | Biography)

According to the 2005 Investment Company Institute Fact Book, nearly 600 financial intermediaries in the U.S. and around the world compete in the U.S. mutual fund market. It is estimated that, as of year-end 2004, the top 25 of these firms held 74% of this market's $8.2 trillion total assets under management.

The 8,000 plus publicly traded mutual funds in the U. S. break down by type as follows:

It is a huge understatement to say that for the investing public, this number of fund choices is absolutely overwhelming.

It is important for fund investors to appreciate the importance of investing in funds that are sponsored by financial intermediaries in good standing. That is to say, that they are not saddled with regulatory problems resulting from questionable management practices and governance problems. The serious mutual fund scandals of 2002 and 2003 are, hopefully, behind us. However, it is prudent for fund investors to maintain a watchful eye in this area.

Investors should start by screening for those fund sponsors that are scandal-free and that do a good job of aligning their interests with those of their fund shareholders. Professionals in the mutual fund industry refer to this as good stewardship. The most accessible source of stewardship grades is a Morningstar Fund Report. Morningstar's grading of fund sponsor stewardship has become an important part of its evaluative reporting on the mutual fund industry. (For more insight, see Morningstar's Stewardship Grade Service A Welcome Addition.)

It is natural that opinions will differ on fund-sponsor quality. However, it is worthwhile to note that there appears to be a connection between high quality fiduciary management at the fund sponsor level and high quality investment performance at the individual fund level. (For related reading, see Picking The Right Mutual Fund.)

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Fund Investment Qualities

  1. Overview Of The Mutual Fund Industry
  2. History Of The Mutual Fund
  3. How A Mutual Fund Works
  4. Today's Mutual Fund Industry
  5. Fund Investment Qualities
  6. Fund Investment Quality Scorecard (FIQS)
  1. Qualitative Analysis

    Securities analysis that uses subjective judgment based on nonquantifiable ...
  2. Alpha

    Alpha is used in finance to represent two things: 1. a measure ...
  3. Profit and Loss Statement (P&L)

    A financial statement that summarizes the revenues, costs and ...
  4. Liquidity

    The degree to which an asset or security can be quickly bought ...
  5. Equity

    Equity is the value of an asset less the value of all liabilities ...
  6. Profit Margin

    Profit margin is part of a category of profitability ratios calculated ...
  1. Does working capital measure liquidity?

    Working capital is a commonly used metric, not only for a company’s liquidity but also for its operational efficiency and ... Read Full Answer >>
  2. Can mutual funds only hold stocks?

    There are some types of mutual funds, called stock funds or equity funds, which hold only stocks. However, there are a number ... Read Full Answer >>
  3. How do mutual funds compound interest?

    The magic of compound interest can be summed up as the concept of interest making interest. On the other hand, simple interest ... Read Full Answer >>
  4. How do I read and analyze an income statement?

    The income statement, also known as the profit and loss (P&L) statement, is the financial statement that depicts the ... Read Full Answer >>
  5. Do mutual funds pay interest?

    Some mutual funds pay interest, though it depends on the types of assets held in the funds' portfolios. Specifically, bond ... Read Full Answer >>
  6. Why have mutual funds become so popular?

    Mutual funds have become an incredibly popular option for a wide variety of investors. This is primarily due to the automatic ... Read Full Answer >>

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