What is a Mutual Fund?

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Definition:

mutual fund provides a way for people to invest in a diverse range of stocks, bonds, or other securities by buying shares in a financial vehicle that is professionally managed.

Understanding mutual funds

Mutual funds are a type of investment vehicle that is managed by professionals and allows individuals to invest in a mix of securities like stocks, bonds, and money market instruments. These funds are commonly found in company-sponsored retirement plans, but it’s important to note that they come with different fees and expenses based on the share class. The risks and rewards associated with mutual funds are explained in each fund’s prospectus.

Simple Explanation

Buying a share in a mutual fund is kind of like buying a pre-packaged salad…

Similar to when you buy a salad, in a mutual fund, every shareholder receives an identical mix of investments, including stocks, bonds, and cash. As the fund’s value rises or falls, each individual’s investment experiences the same changes.

Disclosure: The investing information provided on this page is for educational purposes only. Stefan Wilfred does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.