What is a mutual fund and how is it structured?
A mutual fund is a pool of stocks, bonds, and other investments owned by the fund’s investors (the shareholders). A fund is typically externally managed; it is not an operating company and it has no employees in the traditional sense. Instead, a fund relies on third parties or service providers that are either affiliate organizations or independent contractors (the investment adviser, distributor, custodian, transfer agent, and others) to invest fund assets and carry out other business activities. All mutual funds are required by law to have a board of directors (sometimes referred to as a board of trustees).
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