What it is
A mutual fund is a type of investment company that collects money from numerous investors and invests it in a diversified portfolio of stocks, bonds, or other securities. These funds are managed by professional fund managers who make investment decisions based on the fund's stated objectives. Investors buy shares in the mutual fund, and each share represents a proportional ownership of the fund's underlying assets and its income.
Mutual funds are widely accessible to retail investors, often used in retirement accounts like 401(k)s and IRAs, and are priced once a day at their Net Asset Value (NAV). They offer diversification and professional management, but typically charge management fees (expense ratios) and sometimes sales charges (loads). While many are actively managed, passively managed index mutual funds are also popular, mirroring specific market indices at lower costs.
Why it matters
Mutual funds offer professional management and diversification, making it easier to invest in a broad range of securities, often within retirement accounts.
Reviewed under editorial standardsUpdated September 26, 2026Not investment advice