Editing Mutual fund (section)

==Definitions of key terms==
===Average annual total return===
Mutual funds in the United States are required to report the average annual compounded rates of return for one-, five- and ten-year periods using the following formula:<ref>{{cite web | url=https://www.sec.gov/rules/final/33-7512f.htm#E12E2 | title=Final Rule: Registration Form Used by Open-End Management Investment Companies: Sample Form and instructions | date=March 23, 1998 | publisher=[[U.S. Securities and Exchange Commission]] | access-date=March 26, 2017 | archive-date=March 27, 2017 | archive-url=https://web.archive.org/web/20170327080832/https://www.sec.gov/rules/final/33-7512f.htm#E12E2 | url-status=live }}</ref>

:''P'' × (1+''T'')<sup>''n''</sup> = ''ERV''

Where:

:''P'' = a hypothetical initial payment of $1,000
:''T'' = average annual total return (as a percentage divided by 100, e.g., 0.05 for a 5% return)
:''n'' = number of years
:''ERV'' = ending redeemable value of a hypothetical $1,000 payment made at the beginning of the one-, five-, or ten-year periods at the end of those periods (or fractional portion).

===Net asset value===
{{Main|Net asset value}}
A fund's net asset value (NAV) equals the current market value of a fund's holdings minus the fund's liabilities (this figure may also be referred to as the fund's "net assets"). It is usually expressed as a per-share amount, computed by dividing net assets by the number of fund shares outstanding. Funds must compute their net asset value according to the rules set forth in their prospectuses. Most compute their NAV at the end of each business day.

Valuing the securities held in a fund's portfolio is often the most difficult part of calculating net asset value. The fund's board typically oversees security valuation.

===Share classes===
A single mutual fund may give investors a choice of different combinations of front-end loads, back-end loads and distribution and services fee, by offering several different types of shares, known as share classes. All of them invest in the same portfolio of securities, but each has different expenses and, therefore, different net asset values and different performance results. Some of these share classes may be available only to certain types of investors.

Typical share classes for funds sold through brokers or other intermediaries in the United States are:
* '''Class A''' shares usually charge a front-end sales load together with a small distribution and services fee.
* '''Class B''' shares usually do not have a front-end sales load; rather, they have a high contingent [[deferred sales charge]] (CDSC) that gradually declines over several years, combined with a high [[12b-1]] fee. Class B shares usually convert automatically to Class A shares after they have been held for a certain period.
* '''Class C''' shares usually have a high distribution and services fee and a modest contingent deferred sales charge that is discontinued after one or two years. Class C shares usually do not convert to another class. They are often called "level load" shares.
* '''Class I''' are usually subject to very high minimum investment requirements and are, therefore, known as "institutional" shares. They are no-load shares.
* '''Class R''' are usually for use in retirement plans such as [[401(k)]] plans. They typically do not charge loads but do charge a small distribution and services fee.
No-load funds in the United States often have two classes of shares:
* '''Class I''' shares do not charge a distribution and services fee
* '''Class N''' shares charge a distribution and services fee of no more than 0.25% of fund assets
Neither class of shares typically charges a front-end or back-end load.

===Portfolio turnover===
''Portfolio turnover'' is a measure of the volume of a fund's securities trading. It is expressed as a percentage of the average market value of the portfolio's long-term securities. Turnover is the lesser of a fund's purchases or sales during a given year divided by average long-term securities market value for the same period. If the period is less than a year, turnover is generally annualized.