WHAT IS A MUTUAL FUND?

A mutual fund is a type of investment in which investors pool their money together to buy a portfolio of stocks, bonds or other securities in order to take advantage of diversification and professional portfolio management at a reasonable cost. Securities in actively managed funds are selected by a team of investment managers and research analysts. Investing in mutual funds enables those investing a modest amount of money to benefit from the same advantages enjoyed by large institutional investors.

The “net asset value” (NAV), or price of a fund, is calculated at the end of each trading day by dividing the number of the fund's outstanding shares by the total value of the securities in the portfolio. The NAV changes each day based on the value at market close of the individual securities held by the fund.

Mutual funds come in many varieties

Mutual funds come in many varieties, designed to meet different investor goals. Most of Franklin Templeton’s mutual funds fall into one of four main asset classes:

Equity Funds

Fixed Income Funds

Multi-Asset Funds

Alternative Funds

Advantages of Mutual Funds

Mutual funds have several advantages over holding individual securities in your investment portfolio.

1. Professional Management — A mutual fund offers investors access to full-time, professional money managers who have the expertise, experience and resources to actively buy, sell, and monitor investments.

2. Diversification — Mutual funds enable you to hold a wide variety of securities at a much lower cost than you could on your own. If one investment decreases in value, another investment in the portfolio may increase. By holding shares in various types of funds, you can take advantage of opportunities in many asset classes across changing market environments.

3. Affordability — Mutual funds enable even small investors to take advantage of professional asset management and diversification with low investment minimums. Compared to most funds, it would require a larger investment, and incur greater costs, to purchase directly all of the individual securities held by a single mutual fund.

4. Liquidity and convenience — Most mutual funds allow investors to buy and sell shares on any business day. Many funds enable you to set up a regular, automatic purchase program to help you build a nest egg. They also allow you to automatically reinvest interest, dividends, and capital gains in order to buy even more shares.

What Are the Tax Considerations with Mutual Funds?

Mutual funds are required to periodically distribute their dividends, interest, and capital gains, if any, to their investors. This is usually done monthly, quarterly, or annually. Like individual stocks and bonds, these distributions are subject to taxation. Dividend and interest income is generally taxed at your ordinary income tax rate. Distributions of capital gains from the sale of securities by the fund may be taxed as ordinary income or as a long-term capital gain, depending on how long the securities were held by the fund.

Investors may also be subject to ordinary income tax or capital gains taxes when selling fund shares based on how long the shares were held. Dividend distributions from mutual funds that invest in municipal bonds are generally exempt from federal income tax and in some cases by state income tax as well, depending on the fund. Capital gains distributions generally are taxable. Taxes on mutual funds held in an individual retirement account or other tax-advantaged account are generally deferred until the holder begins withdrawing money from the account.

Mutual Fund Fees and Expenses

Mutual funds charge fees to cover their expenses, which include professional management, transaction costs for buying and selling securities, fund accounting, legal and other general operating expenses. Investors may incur a sales charge when they buy fund shares. Alternatively, they may be charged a redemption fee if they sell their shares before holding them for a stated period of time.

The expense ratio for each fund states the annual percentage charged by the fund to cover its expenses. Fees and expenses will detract from the fund’s returns.

Types of Mutual Funds

Franklin Templeton offers a wide selection of mutual funds designed to meet different investor goals. Most fall into one of four categories:

Equity Funds

Equity funds invest primarily in common stocks. These funds may have a specific investment style, such as investing in value or growth stocks, or may focus on certain sectors of the market, such as financial services, technology, precious metals, or utilities.

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Fixed Income Funds

Fixed income funds invest primarily in bonds or other debt securities, offering the potential for income generation and capital preservation. Franklin Templeton offers a number of different types of income-producing funds, each with its own characteristics and level of risk, including government bonds, corporate bonds, municipal bonds, securitized assets, bank loans, and currencies.

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Multi-Asset Funds

Multi-asset funds provide exposure to a broad number of asset classes in a single portfolio, offering a level of diversification typically associated with institutional investing. This diversity allows portfolio managers to shift risk exposures by taking advantage of short-term opportunities or managing short-term risks, particularly in volatile markets. These funds may invest in a number of traditional equity and fixed-income strategies, index-tracking funds, financial derivatives, and alternative investments, such as real estate investment trusts (REITs) and commodities.

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Alternative Funds

Alternative funds typically invest in a variety of strategies and asset classes to provide risk and return profiles that have lower correlations to traditional asset classes in order to reduce volatility and improve returns. These funds may invest in such assets as real estate, private equity and debt, infrastructure projects, and derivatives.

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Why Choose Franklin Templeton Mutual Funds?

While many companies offer mutual funds, very few companies can rival Franklin Templeton’s more than 70 years of experience. During that time, we’ve managed through all kinds of markets—up, down, and everything in between. And we’re always preparing for what may come next. This depth of experience, combined with our strength as one of the world’s largest asset managers, has earned Franklin Templeton the trust of investors around the world.


Commitment to Active Management

While we believe there can be a role for passive investing in investors’ portfolios, our belief in the value of active management has consistently been fundamental to our investment approach. Active asset management provides the potential for outperformance and risk diversification relative to the broad market.


Decades of Specialized Expertise

Each of our experienced investment teams provides their own unique style and perspective, building portfolios based on proprietary methodologies. Our multiple manager structure brings together specialized investment teams with distinct styles to offer clients a full range of investment capabilities.


Global Integrated Platform

To give clients around the world access to our best products and ideas, our investment teams are supported by a global platform that includes rigorous compliance and active risk management. That around-the-clock support allows our investment teams to focus on research and portfolio management.

How to Invest in Mutual Funds

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