Mutual Funds and the ponzi scheme

Question 1

Open ended mutual funds part 1

Answer 1

You can invest a certain amount of money into a corporation that will be divided into shares. If you register this corporation with the US Securities Exchange Commission it becomes a mutual fund shared between yourself and the public. The public can provide you money to in return you can create a share equivilant in value to the money they pay you which which will grow as the overall money in the company grows.

Question 2

Open ended mutual funds part 2

Answer 2

Investors can convert the shares into cash by withdrawing shares from your corporation. Investors as a result have the power to withdraw money or add money in the form of purchased and withdrawn shares. The value of the shares will not change.

Question 3

Closed ended fund

Answer 3

Investors can purchase and withdraw shares until the money in the corporation grows to a certain point. After this investors can only trade the shares with others in the market to gain money.

Question 4

Exchange Trade Funds

Answer 4

Money invested in a corporation can grow without limit and large corporations can purchase and withdraw multitude of shares and convert these shares into cash by trading them with other insitutions in the market economy.

Question 5

Ponzi Scheme

Answer 5

This is a trick made by conartists who convince others to invest in their corporation and say that their investments are increasing in amount while in fact they are staying the same and the conartist is using that money for his own purpose. It only works if investors put more money in then they withdraw and can be fooled in the withdrawl.