All I know is that they are a pool of stocks that people invest in. I’m trying to figure out how a mutual fund is managed. Who oversees the capital coming in and out of the fund. How are taxes involved? THANKS
Well, that’s pretty much the gist of it right there. 
The fund itself will have money managers whose job it is to pick stocks to include in the fund, based on the investment objective of the fund (capital growth, degree of risk, etc.). The fund prospectus will delineate what strategy the fund will follow, and the manager(s) will invest in securities they believe best accomplishes the fund objective.
I’m not a tax professional, but I believe capital gains (or loss) are taxed just as other investment income.
Right.
A mutual fund has a certain strategy (e.g. fast growth, diversity, certain market sectors, etc). Every fund (with the exception of certain special types like index funds) has a manager, who chooses which stocks to buy and sell based on the fund strategy. The fund prospectus has a detailed description of the strategy and statistics on how the fund has performed in the past. The manager may be paid partly from the fund investors’ money.
Mutual funds are capital gains/losses and taxed the same as individual stocks, as far as I know. (But I am not a tax guy.)
Also, depending on the stocks involved, you may receive taxable dividends.
There’s been a lot of controversy surrounding mutual funds lately. I prefer the ETFs myself.
http://www.workindex.com/editorial/benefit/ben0402-03.asp
As far as the tax consequences of mutual funds, you pay taxes on dividends when they are issued, and capital gains when you sell (if you have a gain). There’s also expenses with mutual funds, the mutual fund managers sweep a certain percentage of the pot into their pockets every year, whether the fund makes money or not. Some funds have frontend fees or backend fees too, that is, you pay a premium to buy or sell the fund.
Hedge funds on the other hand only collect a fee if they make money. But hedge funds are limited to big investors ($1M or more?).
http://www.thehfa.org/AboutUs.cfm
With ETFs, you pay a normal stock trade commission to buy and sell. You are taxed on any gain when you sell. ETFs don’t pay dividends as far as I know.
Whoops, it seems that there are dividend paying ETFs. Wow, there are much more ETFs out there than I had realized.
I believe that hedge funds are available only to accredited investors, who fulfill more requirements than just having a big bankroll.
Accredited investors also get nice perks like buying stocks before an IPO, etc.
I never paid much attention to ETFs before. I wonder if my Roth IRA will allow them…
The fund distributes the dividends to you usually at year end and you pay taxes. The fund will send you a 1099 form. Often dividends will automatically be reinvested into the fund (at your choice), but you still pay taxes on the reported dividends
All the hedge funds I know also charge a regular fee. Typical hedge fund charges are (or at least used to be) 2% of net asset value each year plus 20% of all gains above the previous highest value of the fund (called the high water mark).
FYI, this is a zombie thread from 2004. Probably resurrected by a now removed spam post