What is Mutual Fund?

A **mutual fund** is an investment vehicle that pools money from multiple investors to invest in a diversified portfolio of stocks, bonds, or other securities. Managed by professional fund managers, mutual funds allow individual investors to access a variety of assets without needing to select or manage them individually. When you invest in a mutual fund, you're buying shares of that fund. The value of those shares fluctuates based on the performance of the underlying assets in the fund. Mutual funds offer diversification, which helps reduce risk by spreading investments across different securities rather than putting all money into one asset. Mutual funds can be actively or passively managed. - **Actively managed mutual funds** have a manager or team making decisions about which securities to buy and sell in an effort to outperform the market or a benchmark index. - **Passively managed mutual funds** (e.g., index funds) aim to replicate the performance of a specific market index, like the S&P 500, with lower fees since there’s minimal active management involved. Mutual funds are typically suitable for long-term investors looking for a balanced investment approach.