Trading in mutual funds is carried out under strict government regulations. In accordance with the Securities Act of 1933 and the Securities Exchange Act of 1934, all mutual funds must be registered with the US Securities and Exchange Commission (SEC). Disclosure of information about relevant details and the acquired securities are also legally essential.
Specific features of mutual funds include liquidity, transfer of money, purchase of units and high competition. Investment in mutual funds is highly liquid as funds are required to redeem shares daily. It permits transfer of money from one type of fund to another, but the exchange takes place within the same fund family. Units of mutual funds can either be purchased directly or through an investment professional, such as a broker or a financial planner.
Mutual funds are classified on the basis of maturity period or investment objective. On the basis of maturity period, mutual funds include open ended funds and close ended funds.
Mutual funds based on investment objectives include growth/equity-oriented funds, income/debt-oriented funds, balanced funds, gilt funds and index funds.