What is a fund?

• A fund is money saved and then made available for any purpose, as defined by the Oxford Language Dictionary. Also defined as financial resources (noun) 

  Example: Vacation fund, wedding fund

• Supply money for a particular expense (verb)

  Example: The government funded a project for the homeless

• Fund Synonyms: (noun) endowment, investment, capital, savings

Other Definitions for Fund

• Fund definition in business - a pool of money reserved for a specified expense category. Companies set aside funds for different expense items to complete their budget, such as sales and marketing fund, emergency fund, 

• Fund definition in accounting - an investment type that collects money from people.

• Fund definition in stocks - stock fund (also known as equity fund) is a kind of investment company that invests mainly in commodities or equities, also known as equity securities. Some equity funds focus on a particular market sector, some on the size of the company, (for example, small-cap or large-cap) and others on securities of one country or multiple countries.

• Fund definition in banking -  Banking funds are open-ended equity pools of money invested mainly in the banking sector only. This kind of sector fund can be bought and sold anytime.

• Fund definition in investing - Investment funds are a financial tool that collates money from different individuals to channel into financial instruments such as company shares, fixed-income securities, and ETFs, to name a few.

Fund-Related Terms

• Fund Accountant - an individual tasked with managing books for assigned mutual and investment funds. This type of accountant also analyzes fund performances and draws recommendations based on the analysis results. 

• Fund Manager - a person who administers the fund investment strategies and manages trading activities. Fund managers are in charge of fund analysts, active or passive funds; oversee mutual funds and retirement investments, and make investment decisions based on the results of fund investment strategies implemented.

• Fund of Funds - an investment tool that pools together funds and is invested in other funds such as mutual funds, ETFs, and other similar financial instruments.

• Fund Family - a group of separate investments managed by a single investment company. 

• Fund Flow Statement - a document that reveals why anomalies and changes exist in a company’s financial flow. The statement presents how the fund/funds were used, the rationale for deviations from previous plans, and the results of that deviation, within a single time period.

• Fund in Private Equity - an investment instrument wherein the money of different individuals is pooled in a fund by an advisor who makes investments using that fund. Private Equity funds are long-term investments that usually last 10 or more years.

• Fund Trust - a legal disposition that enables individuals to set aside properties or assets in a special account to benefit another person or entity.

• Fund Index - a type of investment (usually Mutual Fund or Exchange Traded Fund) with a portfolio designed to track a financial market index's elements, like Standard & Poor’s 500 Index.

• Fund Feeder - An investment instrument that pools multiple investors’ capital commitments and “feeds” (invests) this capital into a master fund, also known as an umbrella fund. Hedge funds or private equity funds commonly implement a feeder fund to pool investment capital.

Is a Fund an Investment?

A fund can be an investment, whether the setting aside of money is for personal or financial reasons. Personal investments include college funds, real estate funds, retirement funds, and other personal goals that can be achieved by setting aside money to spend for these goals. For example, financial investments can be money for different securities, money market instruments, mutual funds, ETFs, or company shares.  

How is a Fund used?

A fund is used to finance a goal or investment. Companies have different funds allocated for different goals or projects. Examples of company funds are CSR funds (Corporate Social Responsibility), usually for charity projects; investment funds, which can be for retirement plans or the company’s investment portfolio; and expense funds for advertising, sales and marketing, and customer relations.

How does a fund make money?

A fund makes money by earning income from dividends on stock or interest on bonds. The fund then pays the shareholders nearly all the income, less expenses. Capital Gains Distributions. The price of the securities in a fund may increase.

Are a Fund and Budget the same?

A fund and budget are not the same. A budget is the proposed estimated cost for work or projects in a given fiscal year. Funds are the appropriated amounts for work in that same fiscal year.

What are the different types of funds?

The different types of funds are:

Personal Funds

Here are funds usually set up for personal goals:

• College Fund - Tax-advantaged plans which families invest in for their children’s college education.

•  Retirement Fund- Investment of individuals to prepare for retirement. Usually offered by companies as 401k plans or set up by individuals themselves as individual retirement accounts (IRA)

• Trust fund - Legal arrangements involving a grantee instructing an appointed trustee to manage assets for a beneficiary within a specific given time, after which all or a portion of the assets/funds are released to the beneficiary.

Government Funds

• Debt-service funds - used to settle government debts.

• Capital projects funds - money allocated for a country’s capital projects such as investment securities, acquisition, development or renovation of infrastructure, technology, and other similar projects. 

• Permanent funds are investments/assets the government cannot cash out or spend but can spend earnings generated by these investments on government operations.

What is a Mutual Fund?

A mutual fund is a kind of investment fund that pools the money of many investors to buy securities. Some of the fund types above are forms of mutual funds. Often classified by their main investments, mutual funds include:

• Fixed-income funds
• Money market funds
• Stock or equity funds
• Index funds
• Fund of funds

What is a fund of funds?

A fund of funds is an investment strategy wherein a pool of investments from different individuals is invested in other funds such as mutual funds, ETFs, company stock, and other similar financial instruments.

How does a fund of funds work?

A fund of funds works usually by investing in a hedge fund or mutual fund. The strategy is to diversify investments while minimizing risk. Risk can be defined as possible losses on investment because of falling prices of stocks, bonds, or ETFs invested. The diversity of this type of investment strategy minimizes the risk of losses.

Are fund investments better than savings?

Funds as an investment are better than savings if the end goal is long-term. For example, funds are good for a college education or planning for retirement. There is potential to earn higher with investment funds but with risks as well, depending on the type of investment funds chosen. Savings are good for short-term needs, as the money can easily be withdrawn anytime. However, savings earn less though the risks are less as well.

Are fund investments taxable?

Fund investments are taxable. Similar to individual securities, any profit gained from dividends or selling shares of a mutual fund or ETF is realized capital gain and is, therefore, taxable.

What do funds in use mean?

Funds in use mean funds disbursed or utilized. This means the money set aside for a certain purpose has been spent or used either partially or entirely.

Conclusion

Funds can serve as a combination of savings and investments though they are usually for long-term planning. There is a wide range of fund types that can fit investment goals, such as high-income yields but may present higher risks, or safer investments that are still with a potential to earn but with lower yields.

Different funds can be combined in an investment portfolio to ensure that a balance within the investments will protect the money invested. All it takes is studying closely the pros and cons of each fund investment type to arrive at the right diversification of investments.