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Definition of the Week: Mutual Fund

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Mutual Fund

What is a mutual fund?

A mutual fund is an investment vehicle created by a company to pool together funds from investors for the purpose of investing in a variety of assets. Each specific mutual fund has its own clearly defined set of objectives. Money managers invest the fund’s capital and try to produce capital gains and income for their investors.

stockbroker.com Explains Mutual Funds

The mutual fund has been around since the 1920′s, but the mutual fund became extremely popular in the 1980′s and 1990′s. The primary advantage of a mutual fund is that it allows the small investor the chance to diversify their portfolio instantly. This level of diversification is just not possible with an individual portfolio of stocks unless the investor has a large amount of cash in that portfolio. Every mutual fund has an objective, and based on those objectives the money managers will invest in many different types of securities. Not all mutual funds are created equal. Before purchasing a mutual fund make sure you do your due diligence.

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