Mutual Fund

AAA

DEFINITION of 'Mutual Fund'

An investment vehicle that is 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 similar assets. Mutual funds are operated by money managers, who invest the fund's capital and attempt to produce capital gains and income for the fund's investors. A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus.

INVESTOPEDIA EXPLAINS 'Mutual Fund'

One of the main advantages of mutual funds is that they give small investors access to professionally managed, diversified portfolios of equities, bonds and other securities, which would be quite difficult (if not impossible) to create with a small amount of capital. Each shareholder participates proportionally in the gain or loss of the fund. Mutual fund units, or shares, are issued and can typically be purchased or redeemed as needed at the fund's current net asset value (NAV) per share, which is sometimes expressed as NAVPS.

Are you interested in Mutual Funds? Check out How To Pick A Good Mutual Fund and our Mutual Funds Tutorial for more information!

VIDEO

Loading the player...
RELATED TERMS
  1. Exchange Traded Products – ETP

    A type of security that is derivatively-priced and which trades ...
  2. Lipper Leader

    A rating system that ranks a mutual fund's success based on whether ...
  3. Burst Basket

    A burst basket refers to a particular type of stock transaction ...
  4. Asset Allocation Fund

    A mutual fund that provides investors with a portfolio of a fixed ...
  5. Balanced Fund

    A fund that combines a stock component, a bond component and, ...
  6. Closed-End Fund

    A closed-end fund is a publicly traded investment company that ...
RELATED FAQS
  1. Are there mutual funds that take advantage of merger arbitrage?

    A few select mutual funds focus investing on merger arbitrage. Among these are the Merger Fund, the Arbitrage Fund and the ... Read Full Answer >>
  2. What are some of the most common mutual funds that give exposure to the retail sector?

    There are a number of mutual funds that give exposure to the retail sector. Three of the most popular funds are the Fidelity ... Read Full Answer >>
  3. What are the most popular mutual funds that give exposure to the utilities sector?

    Some of the most popular mutual funds that provide exposure to the utilities sector include American Century Utilities, Prudential ... Read Full Answer >>
  4. What are some popular mutual funds that give exposure to the telecommunications sector?

    Some of the most popular mutual funds that give investors exposure to the telecommunications sector include the Fidelity ... Read Full Answer >>
  5. What are common mutual funds an investor should consider for investing in oil and ...

    Among popular oil and gas mutual funds for investors to consider, some of the best performing funds, as of January 2015, ... Read Full Answer >>
  6. In what ways are ETFs more tax efficient than mutual funds?

    Exchange-traded funds (ETFs) can be more tax-efficient than standard mutual funds. In general, conventional ETFs have fewer ... Read Full Answer >>
  7. Who regulates the various types of exchange traded funds (ETFs)?

    The Securities and Exchange Commission (SEC), under the Securities Act of 1933, regulates the vast majority of exchange-traded ... Read Full Answer >>
  8. What is the most important section in an investment company's prospectus?

    It is important for investors to examine all information contained within an investment company’s prospectus. However, the ... Read Full Answer >>
  9. What are some popular mutual funds that give exposure to the drugs sector?

    The pharmaceutical industry has experienced outstanding growth in the 10 years leading up to 2015, consistently outperforming ... Read Full Answer >>
  10. What can cause the rate of return to be negative?

    Several factors can cause an investment to have a negative rate of return. Poor performance of a company or companies, turmoil ... Read Full Answer >>
  11. What are the primary risks to understand when investing in the automotive sector?

    Investors in the automotive sector should be aware of strong competition among U.S. and foreign automakers. The U.S. market ... Read Full Answer >>
  12. When is an expense ratio considered high and when is it considered low?

    A number of factors determine when an expense ratio is relatively high or low, but a good, low expense ratio is generally ... Read Full Answer >>
  13. Why is a mutual fund's expense ratio important to investors?

    A mutual fund's expense ratio is very important to investors because fund operating and management fees can have a large ... Read Full Answer >>
  14. What are the disadvantages of an index fund over an actively managed fund?

    An actively managed fund – more commonly referred to as a mutual fund – has a higher risk versus reward value, is much less ... Read Full Answer >>
  15. How can I invest in credit card companies?

    In a consumer economy fueled by credit, a natural place to look for a lucrative investment opportunity is with credit card ... Read Full Answer >>
  16. What are the most popular mutual funds that give exposure to the railroads sector?

    The railroad industry makes up nearly half of North American freight transportation from city to city and can provide dependable ... Read Full Answer >>
  17. How often should I be checking the NAV of my mutual fund shares?

    You can check the net asset value (NAV) of your mutual fund shares anywhere from daily to annually. It is commonly recommended ... Read Full Answer >>
  18. What is the difference between a REIT and a real estate fund?

    Both real estate funds and real estate investment trusts (REITs) are used when diversifying a long-term investment portfolio. ... Read Full Answer >>
  19. What are typical trust fund management fees?

    The asset management fee is a straightforward fee charged on a trust fund. It is expressed as a fixed percentage of the total ... Read Full Answer >>
  20. What was the first mutual fund?

    Although it is uncertain, many trace the creation of the first mutual fund back to Dutch merchant Adriaan Van Ketwich. In ... Read Full Answer >>
  21. When did mutual funds come to the U.S.A.?

    On March 21,1924, the Massachusetts Investors Trust was incorporated, marking the birth of the American mutual fund industry. ... Read Full Answer >>
  22. How do I find mutual funds that track indexes?

    The two best sources for finding index funds are Fidelity Investments and Vanguard.Of the 57 index funds in investment research ... Read Full Answer >>
  23. Is it possible to buy mutual funds using a margin account?

    Because of the pricing/trading mechanisms used with mutual funds, they cannot be bought and sold like stocks. When trading ... Read Full Answer >>
Related Articles
  1. Mutual Funds & ETFs

    Are Mutual Funds Doomed?

    Decreases in mutual fund classes and the growing use of ETFs means the future of mutual funds will be anything but smooth.
  2. Mutual Funds & ETFs

    ETFs Or Mutual Funds For Your IRA?

    Most actively managed mutual funds fail to beat the market over a long period of time, so it's probably best to go with ETFs for your IRA.
  3. Mutual Funds & ETFs

    Mutual Funds Vs. ETFs: Energy

    There are a number of choices to gain exposure to the energy sector. We go over some of the more prominent options.
  4. Mutual Funds & ETFs

    Mutual Funds Vs. ETFs: Small Cap Stocks

    For individual investors, a passive strategy may be best when investing in the small-cap realm of equities.
  5. Mutual Funds & ETFs

    When To Sell A Mutual Fund

    Unhappy with your mutual fund's returns and thinking of investing elsewhere? Read this article first.
  6. Mutual Funds & ETFs

    How To Pick A Good Mutual Fund

    Learn how to evaluate mutual funds and find the right one for you.
  7. Mutual Funds & ETFs

    5 Ways To Measure Mutual Fund Risk

    These statistical measurements highlight how to mitigate risk and increase rewards.
  8. Retirement

    Are Mutual Funds A Relic?

    We list some options other than mutual funds for your retirement plan.
  9. Active Trading Fundamentals

    Analyzing Mutual Fund Risk

    Find out whether a fund's performance is a result of the manager's abilities, or just a fluke.
  10. Mutual Funds & ETFs

    How To Build Your Own Mutual Fund

    Creating your own mutual fund can save you the fees that cut into your profits. Find out how.

You May Also Like

Hot Definitions
  1. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  2. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  3. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  4. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  5. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  6. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!