Pooled Investments Explained— Mutual Funds, ETFs and more
Understand the basics of passive investing
Pooled investments are a single portfolio that contains investment funds from multiple investors. Every investor owns shares of the pooled investment, which represents their portion of the overall portfolio. Total net asset value (NAV) is calculated and then divided by the number of shares outstanding to get to the NAV per share. We will be discussing public equities, private equity, and debt instrument pooled investments. I will also cover some of the things to look out for when choosing between investment options.
Overview
Funds are separated into open-end funds and closed-end funds. With open-end funds, new investors can purchase newly issued shares at the NAV. This recently invested cash would then be financed by the mutual fund portfolio managers in a unique portfolio of securities. Because these funds type is open, investors can redeem their shares or sell them back to the fund at the NAV without too many restrictions. Closed-end funds, on the other hand, are pools of money that do not allow new investments into the fund or sales of investor shares. Closed-end funds trade like shares, over the counter or through exchanges. The way that these funds make money is through management fees, which are based on a…
