A mutual fund is a type of investment vehicle made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments, and other assets. These funds are managed by professional money managers who make investment decisions on behalf of the investors, in accordance with the fund’s stated investment objectives and strategies.
Investors buy shares of the mutual fund, and the value of these shares fluctuates based on the performance of the underlying securities in the fund’s portfolio. Mutual funds offer investors the opportunity to diversify their investments across a wide range of assets without needing to individually select and manage each security. They also provide liquidity, as investors can typically buy or sell shares of the mutual fund on any business day at the fund’s current net asset value (NAV).
Mutual funds are often categorized based on their investment objectives, such as growth, income, or a combination of both, as well as by asset class, geographic focus, and risk level. They are a popular investment choice for individual investors, retirement accounts, and institutional investors due to their convenience, diversification benefits, and professional management.