Finance Dictionary
Mutual Fund
Definition
An investment program funded by shareholders that trades in diversified holdings and is professionally managed.
Deep Dive
A mutual fund is a type of investment vehicle that pools money from multiple investors to collectively purchase a diversified portfolio of securities, such as stocks, bonds, money market instruments, and other assets. These funds are professionally managed by a fund manager or team, who make investment decisions on behalf of the shareholders, aligning with the fund's stated investment objectives, whether it's growth, income, or capital preservation.
Examples & Use Cases
- 1An individual investing in an S&P 500 index mutual fund to gain broad exposure to the performance of 500 large U.S. companies
- 2A retiree investing in a bond mutual fund to generate steady income and preserve capital
- 3A young investor putting money into a growth-oriented mutual fund focused on emerging market technology stocks.
Related Terms
Exchange-Traded Fund (ETF)Portfolio DiversificationFund ManagerNet Asset Value (NAV)StocksBonds