Mutual Fund Definition
A mutual fund is an investment vehicle in which a pool of investors collectively put forward funds to an investment manager to make investments on their behalf.
They are regulated by the Securities Exchange Commission, or SEC.
When involved with a mutual fund, each investor benefits proportionally to the amount of money they invested.
Defining Mutual Funds in Simple Terms
Mutual funds can be a good opportunity for small or individual investors to benefit from a professionally managed investment portfolio.
Mutual funds usually invest in a large number of securities, and their performance is tracked as the change in the market cap of the fund, which itself is determined by the performance of the underlying investments.
Mutual Fund Example
As opposed to buying traditional stocks, buying shares of a mutual fund does not give investors voting rights in any company; instead the fund manager votes on their behalf.
However, since mutual funds generally incorporate hundreds of different securities, it does give investors the benefit of diversification of their portfolios.
The value of a share of mutual fund is called the net asset value per share, or the NAV.
The price is determined by taking the net value of all the securities in the fund and dividing by the outstanding shares.
Learn more about Mutual Fund
Mutual funds are a type of investment that pool the money from many investors and invest it collectively. They can be an effective way to diversify your portfolio, but there is risk involved.
To learn more about whether mutual funds may be right for you or not, reach out to a financial advisor in Weirton, WV. For those of you that do not live locally, please visit our financial advisors home page to see the areas we serve.
What Is a Mutual Fund FAQs
About the Author
True Tamplin, BSc, CEPF®
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.