Discover what a mutual fund is, an investment vehicle that pools money from multiple investors to buy a diversified portfolio of stocks, bonds, or other securities.
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 investment managers who allocate the fund's assets and attempt to produce capital gains or income for the fund's investors. Investors in mutual funds buy shares of the fund and become shareholders, with each share representing a portion of the holdings of the fund.
There are various types of mutual funds available to investors, including equity funds, which invest primarily in stocks; fixed-income funds, which invest in bonds and other debt securities; money market funds, which invest in short-term, low-risk securities; and balanced funds, which invest in a mix of stocks, bonds, and other assets to provide a diversified portfolio.
Mutual funds offer several benefits to investors, including diversification, professional management, liquidity, and affordability. By pooling funds from multiple investors, mutual funds allow for greater diversification than individual investors may be able to achieve on their own. Additionally, mutual funds are managed by experienced professionals who make investment decisions on behalf of the fund's shareholders.
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