Mutual Fund

Quick Answer

A mutual fund pools money from many investors to purchase a diversified portfolio of stocks, bonds, or other securities managed by a professional.

Definition

A mutual fund pools money from many investors to purchase a diversified portfolio of stocks, bonds, or other securities managed by a professional.

Explanation

Mutual funds are priced once daily at Net Asset Value (NAV). They are suitable for investors who want diversification without researching individual securities.

Example

Investing $500/month in a mutual fund tracking the S&P 500 for 20 years with 8% average return would grow to approximately $275,000.

Frequently Asked Questions

What is Mutual Fund?

A mutual fund pools money from many investors to purchase a diversified portfolio of stocks, bonds, or other securities managed by a professional.

How does Mutual Fund work?

Mutual funds offer instant diversification and professional management. Investors buy shares of the fund, which represents a portion of its holdings. Funds can be actively managed (a manager picks investments) or passively managed (tracking an index). Active funds typically have higher fees called expense ratios.Mutual funds are priced once daily at Net Asset Value (NAV). They are suitable for investors who want diversification without researching individual securities.