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

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. Mutual Fund Timing

    A legal, but frowned-upon practice, whereby traders attempt to ...
  5. Asset Allocation Fund

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

    A fund that combines a stock component, a bond component and, ...
Related Articles
  1. Mutual funds face competition from other financial instruments
    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. Energy options to consider for your portfolio. We'll explore the differences between mutual funds and ETFs
    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. Scarcity

    The basic economic problem that arises because people have unlimited wants but resources are limited. Because of scarcity, ...
  2. Trust Fund

    A trust fund is a fund comprised of a variety of assets intended to provide benefits to an individual or organization. The ...
  3. Christmas Tree

    An options trading strategy that is generally achieved by purchasing one call option and selling two other call options at ...
  4. Christmas Club

    A short-term savings account that usually pays out the full account balance to its account holders once each year, right ...
  5. Boston Snow Indicator

    A market theory that states that a white Christmas in Boston will result in rising stock prices for the following year. For ...
  6. Christmas Island Dollar

    The former currency of Christmas Island, an Australian island in the Indian Ocean that was discovered on December 25, 1643. ...
Trading Center