Definition of Diversified Fund / Diversified Management Company

Diversified Fund / Diversified Management Company is a mutual fund that distributes its investment capital among a wide variety of investments. In order for a mutual fund to market itself as a diversified mutual fund they must meet the 75-5-10 rule. 75% of the funds assets must be invested in securities issued by other entities, no more than 5% of the fund’s assets may be invested in any one issuer, and the fund may own no more that 10% of any one company’s outstanding securities.

Applying "Diversified Fund / Diversified Management Company" to Securities Exams:

One of the main benefits for investors who purchase mutual funds is the fact the the investor may participate in performance of a large number of securities by making a single investment in the mutual fund. That is to say that the investor makes one investment in the fund and has diversified the investment across a large number of securities. If the mutual fund does not meet the rules regarding diversification they may not market themselves as a diversified fund.

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