If you`re looking to invest in mutual funds, you`ll likely come across the term «dealer agreement mutual fund.» But what exactly does it mean?
A dealer agreement mutual fund is a mutual fund that has entered into an agreement with a dealer or financial advisor to distribute its shares to investors. In essence, the dealer acts as an intermediary between the fund and the investor.
The dealer agreement outlines the terms of the distribution agreement, including the compensation the dealer will receive for selling the fund`s shares. This compensation is typically in the form of a commission based on the amount of shares sold.
The dealer agreement also outlines the responsibilities of the dealer, which includes conducting due diligence on the fund and its investment strategies, ensuring that the investor is provided with relevant information about the fund, and disclosing any conflicts of interest.
While dealer agreement mutual funds can be a convenient way for investors to access mutual funds, there are some potential drawbacks to be aware of. One downside is that the commissions paid to dealers can increase the cost of investing in the fund, which can eat into potential returns.
Additionally, because the dealer is acting as an intermediary, there is a risk that the investor may not receive all of the information they need about the fund. It`s important for investors to do their own research and seek out information about the fund beyond what is provided by the dealer.
Overall, dealer agreement mutual funds can be a useful investment option for those who prefer to work with a financial advisor or who may not have the time or expertise to do their own investment research. However, it`s important for investors to carefully consider the costs and potential limitations of these funds before investing.