Mutual Fund
A Mutual Fund is a portfolio of securities formed by pooling the money of many investors. Professional managers do the research and make the investment decisions based on the goals of a particular fund. For most funds, the price per share that investors pay is determined by dividing the fund's net asset value (NAV) by the number of outstanding shares. When an investor adds funds, new shares are issued; when someone liquidates their holdings, the shares are redeemed by the fund. There are some "closed-end" funds that issue a limited number of shares, which investors buy and sell on the market much as they do stocks. Share prices for closed-end funds are determined by market forces rather than the NAV.
Insurance
A promise of compensation for specific potential future losses in exchange for a periodic payment. Insurance is designed to protect the financial well-being of an individual, company or other entity in the case of unexpected loss. Some forms of insurance are required by law, while others are optional. Agreeing to the terms of an insurance policy creates a contract between the insured and the insurer. In exchange for payments from the insured (called premiums), the insurer agrees to pay the policy holder a sum of money upon the occurrence of a specific event. In most cases, the policy holder pays part of the loss (called the deductible), and the insurer pays the rest. Examples include car insurance, health insurance, disability insurance, life insurance, and business insurance. |
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