A mutual fund is an investment vehicle that pools money from many investors to collectively purchase a diversified portfolio of securities such as stocks, bonds, and other assets. Instead of buying individual securities, investors buy shares in the mutual fund, which represents partial ownership of all the fund's holdings
. Mutual funds are managed by professional money managers who decide which securities to buy or sell based on the fund's investment objectives, such as growth, income, or index tracking. This professional management allows investors to benefit from expert research and portfolio management without having to manage investments themselves
. Key features of mutual funds include:
- Diversification: By pooling money, investors gain access to a broad range of securities, which helps spread risk
- Professional management: Fund managers handle investment decisions and ongoing portfolio monitoring
- Accessibility: Mutual funds allow investors to participate with relatively small amounts of money, making diversified investing more accessible
- Pricing: Shares are priced daily based on the net asset value (NAV), which is the total value of the fund's holdings divided by the number of shares outstanding
- Fees: Mutual funds charge fees such as operating expenses and sometimes sales loads, which can affect returns
Overall, mutual funds provide a convenient way for individual investors to invest in a professionally managed, diversified portfolio, which might be difficult to achieve on their own
