Mutual Fund Fraud

Investors saving for retirement or other related financial goals may invest their savings into a mutual fund. A mutual fund is a pooled investment that is managed by an investment company or its designated asset management company.  The management company essentially receives money from multiple small investors and invests it in various securities. The underlying investments may be stocks, bonds, cash, alternative investments, derivatives or any combination of them.  As a group, mutual funds vary greatly in the amount of risk they present to the investor. The key question is whether the underlying investments and risks are suitable or unsuitable for the investor based on the investor’s investment profile and needs.

What Is Mutual Fund Fraud

Two main selling points of mutual funds are ease of diversification and lower costs than would be typically incurred if one were to hire an investment advisor to manage one’s investments.   Diversification (not putting all your “eggs in one basket”) tends to reduce risk. Still, mutual funds may be diversified or not diversified. They may vary enormously in the types of investments they make and the amount of risk they present.

Mutual funds are generally supposed to be long-term investments.  Mutual funds are priced daily based on their net asset value and are not traded on an exchange like stocks, bonds, and exchange-traded funds.  In addition, some mutual funds impose penalties to discourage short-term trading. Still, brokers may recommend inappropriate and excessive trading and switching of mutual funds for the purpose of receiving commissions and fees from the transaction. This is why you would need a securities fraud lawyer. 

How Is Mutual Fund Fraud

If you have experienced a significant investment loss, whether in mutual funds or other types of investments, The Doss Firm, LLC can help. Call us for a free consultation.