Mutual Funds

Introduction and Background of Mutual Fund Industry Over the past 75 years, there has been no better way to experience financial growth than to have been a long-term investor in the U.S. stock market. Even though they have experienced some dramatic downturns, stocks, which are ownership shares in public corporations, have outperformed all other types of investments including bonds, CDs and U.S. Government securities and they have stayed ahead of inflation. Like the stock market, successful investing is never a sure thing, since you can't predict what the value of your investment or your rate of return will be at any point in time. Yet, despite this uncertainty, the stock market remains among the best choices for long-term investing. Stocks or equity securities represent ownership shares in a company and the right to share in both its profits (stock dividends) and its growth (rising share price). For both of these reasons, stocks have become an "investment of choice," particularly for millions of investors looking for capital appreciation. While the stock market is known for its ups and downs, and individual stocks can rise or plummet overnight, as a whole, stocks have delivered a larger return on investment over the long run th

Forceful steps must be taken immediately to restore and reinforce investor confidence. The mutual fund industry boasts as assets a 7 trillion market value and the confidence of hundreds of millions of people worldwide. But what if more than just fees and commission costs, the returns were diluted by cheating What if they allowed certain investors to abuse the system This would look good in the short term but the long term investors would get hurt. Some have spoken out denouncing the proposal to place blame upon directors, or the fund governance system. And a mutual fund brings the benefits of diversification and money management to the individual investor, providing an opportunity for financial success that was once available only to the very rich. It is important to note that many funds that are susceptible to these abuses have devoted significant resources to efforts to combat such activity. The fact that a scandal of this magnitude has been necessary to discovering the extent of the abuse only further pushed the point that the best funds and businesses are the most transparent ones. " Mutual funds are required to price their shares at least once a day, at a time designated by the fund"tms board of directors and disclosed in the fund"tms prospectus. That profit dilutes the value of shares held by long term investors. Fund managers, although they contractually require intermediaries to segregate orders submitted before 4:00 p. The SEC, not long after the news became public, offered a simple solution to the late trading problem. If funds had a standardized minimum redemption fee along these lines, it would be easier for intermediaries to establish and maintain the necessary systems to enforce payment of those fees.