Instead of buying shares or stocks directly from a corporation or a firm that issues it in stock exchanges, an individual or an entity may opt to invest their money in a mutual fund and become a co-owner of that mutual fund's pooled assets and securities.
Mutual fund companies are the firms or entities that administer the pool of financial investments made by the people. It oversees the purchase and allocation of shares and manages the portfolio of funds it accumulated by determining what security instruments to invest in, how long and what strategies to do to maximize earnings for the firm and dividends for its investors. Data from the Investment Company Institute (ICI) shows that there are over 8,000 mutual fund companies in the United States today, with combined assets amounting to P$12.35 trillion.
As distinguished from a single mutual fund company, there is also the mutual fund family which is a mutual fund firm that has multiple funds intended for different use and multiple mutual fund products. Examples include the American Funds, Fidelity and Vanguard.
There are basically three ways mutual fund companies earn money for its shareholders: First, through payment of dividends and interests earned on the investments less expenses and fees. Second, through capital gains distribution, when the investment (securities) of the firm increased in value and it was sold. Third, through the increasing net asset value (NAV) of the investment, which reflects the value of the investor's shares. All these can be realized provided the mutual fund company is exhibiting good performance.