# What is a mutual fund? **URL:** \ **Category:** Factual Questions\ **Created:** [March 25, 2004, 3:32am UTC](https://boards.straightdope.com/t/what-is-a-mutual-fund/236272 "2004-03-25T03:32:25Z")\ **Posts on this page:** 9\ **Page:** 1
**Author:** ![Carlos619](https://avatars.discourse-cdn.com/v4/letter/c/6bbea6/32.png) [@Carlos619](https://boards.straightdope.com/u/Carlos619)\ **Post date:** [March 25, 2004, 3:32am UTC](https://boards.straightdope.com/t/what-is-a-mutual-fund/236272/1 "2004-03-25T03:32:25Z")
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 ---
**Author:** ![Just\_Ed](https://avatars.discourse-cdn.com/v4/letter/j/e19b73/32.png) [@Just\_Ed](https://boards.straightdope.com/u/Just_Ed)\ **Post date:** [March 25, 2004, 3:49am UTC](https://boards.straightdope.com/t/what-is-a-mutual-fund/236272/2 "2004-03-25T03:49:25Z")
> [@](#): > > All I know is that they are a pool of stocks that people invest in. 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. ---
**Author:** ![friedo](https://avatars.discourse-cdn.com/v4/letter/f/8edcca/32.png) [@friedo](https://boards.straightdope.com/u/friedo)\ **Post date:** [March 25, 2004, 4:08am UTC](https://boards.straightdope.com/t/what-is-a-mutual-fund/236272/3 "2004-03-25T04:08:29Z")
> [@Carlos619](#): > > All I know is that they are a pool of stocks that people invest in. Right. > [@](#): > > 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 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.) ---
**Author:** ![Exapno\_Mapcase](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/exapno_mapcase/32/1051_2.png) [@Exapno\_Mapcase](https://boards.straightdope.com/u/Exapno_Mapcase)\ **Post date:** [March 25, 2004, 4:30am UTC](https://boards.straightdope.com/t/what-is-a-mutual-fund/236272/4 "2004-03-25T04:30:04Z")
Also, depending on the stocks involved, you may receive taxable dividends. ---
**Author:** ![ccwaterback](https://avatars.discourse-cdn.com/v4/letter/c/df705f/32.png) [@ccwaterback](https://boards.straightdope.com/u/ccwaterback)\ **Post date:** [March 25, 2004, 5:00am UTC](https://boards.straightdope.com/t/what-is-a-mutual-fund/236272/5 "2004-03-25T05:00:42Z")
There’s been a lot of controversy surrounding mutual funds lately. I prefer the ETFs myself. > **[Panda Bears Tomboy offers pop cacophony](https://thedailytexan.com/2011/04/12/panda-bear%c2%92s-%c2%91tomboy%c2%92-offers-pop-cacophony/)** > > Hipsters across the country have been losing their Urban Outfitters-cool, apathetic facade to get their hands on Panda Bear’s (Noah Lennox’s solo effort)Tomboy, the follow-up to 2007’s Person Pitch. It’s also Lennox’s first solo album since his other... [http://www.workindex.com/editorial/benefit/ben0402-03.asp](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. > **[Investment Management Education Alliance - Investment Education Center](https://imealliance.com/)** > > The INVESTMENT EDUCATION CENTER was created to help investors learn the investing basic, namely how they can leverage different products to reach lifetime goals. 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](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. [http://www.etfconnect.com/](http://www.etfconnect.com/) ---
**Author:** ![ccwaterback](https://avatars.discourse-cdn.com/v4/letter/c/df705f/32.png) [@ccwaterback](https://boards.straightdope.com/u/ccwaterback)\ **Post date:** [March 25, 2004, 5:17am UTC](https://boards.straightdope.com/t/what-is-a-mutual-fund/236272/6 "2004-03-25T05:17:49Z")
Whoops, it seems that there are dividend paying ETFs. Wow, there are much more ETFs out there than I had realized. [http://www.etfconnect.com/select/etf/fi\_taxable.asp](http://www.etfconnect.com/select/etf/fi_taxable.asp) ---
**Author:** ![Chairman\_Pow](https://avatars.discourse-cdn.com/v4/letter/c/838e76/32.png) [@Chairman\_Pow](https://boards.straightdope.com/u/Chairman_Pow)\ **Post date:** [March 26, 2004, 1:53am UTC](https://boards.straightdope.com/t/what-is-a-mutual-fund/236272/7 "2004-03-26T01:53:08Z")
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… ---
**Author:** ![OldGuy](https://avatars.discourse-cdn.com/v4/letter/o/3bc359/32.png) [@OldGuy](https://boards.straightdope.com/u/OldGuy)\ **Post date:** [May 25, 2022, 4:57pm UTC](https://boards.straightdope.com/t/what-is-a-mutual-fund/236272/9 "2022-05-25T16:57:42Z")
> [@ccwaterback](#): > > 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). 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 > **[Investor | Education Center - IMEAConnect](https://imeaconnect.com/investor-education-center/)** > >       A primary mission of the IMEA has always been to help educate investors on the basics of investing and how they can leverage different products to reach their lifetime goals. We encourage you to visit the links below which... > [@ccwaterback](#): > > 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?). 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). ---
**Author:** ![Great\_Antibob](https://avatars.discourse-cdn.com/v4/letter/g/e47c2d/32.png) [@Great\_Antibob](https://boards.straightdope.com/u/Great_Antibob)\ **Post date:** [May 25, 2022, 5:09pm UTC](https://boards.straightdope.com/t/what-is-a-mutual-fund/236272/10 "2022-05-25T17:09:03Z")
FYI, this is a zombie thread from 2004. Probably resurrected by a now removed spam post