[Economics Report]:Mutual Funds


This is Bob Doughty with the VOA Special English EconomicsReport.

People invest money in the hope their wealth will grow over time.Some have financial advisers make their investments for them. Buteven people without very much money can invest. Of course, there areno guarantees. So one way investors try to limit their risk is tobuy shares in a mutual fund. A mutual fund is a collection ofdifferent financial securities.

Securities include stocks and bonds. Stock in a company gives thebuyer a chance to vote on company issues. Stockholders have afinancial share in the company. They may receive a small payment, adividend, from time to time for each share owned. But the value ofstocks can change greatly in a short time.

Bonds represent a loan. Companies or governments sell bonds as away to borrow money. Buyers earn interest as they wait for the bondsto reach full value over a period of years.

Mutual funds gather money from many investors and buy manydifferent securities. A mutual fund can spread money over hundredsof investments.

In the United States, the mutual fund industry controlsseven-million-million dollars of investments. The oldest fund isMassachusetts Investors Trust, begun in nineteen-twenty-four.

The biggest fund is the Vanguard Five-hundred Index Fund of theVanguard Group. This fund is valued at eighty-two-thousand-milliondollars. It invests in companies listed on the Standard and Poor'sFive-hundred Index. The S-and-P Five-hundred is often used as ameasure of the stock market in the United States.

There is risk in mutual funds. They may lose value. And,recently, some activity in the mutual fund industry has been underinvestigation. In September, New York State Attorney General EliotSpitzer brought charges against a top officer of a mutual fundcompany.

Mister Spitzer said the former vice chairman of Fred AlgerManagement permitted some big investors to trade in ways that otherinvestors could not. Last week James Connelly pleaded guilty tointerfering with an investigation.

Federal officials are also investigating illegal tradingactivities. The chairman of the Securities and Exchange Commission,William Donaldson, has called for new rules for mutual funds.Government lawyers are expected to make proposals next month.

This VOA Special English Economics Report was written by MarioRitter. This is Bob Doughty.

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