Mutual Fund

A mutual fund is an investment security type that enables investors to pool their money together into one professionally managed investment. Mutual funds can invest in stocks, bonds, cash and/or other assets. These underlying security types, called holdings combine to form one mutual fund, also called a portfolio.

In different words, Mutual funds can be considered baskets of investments. Each basket holds dozens or hundreds of security types, such as stocks or bonds. Therefore, when an investor buys a mutual fund, they are buying a basket of investment securities. Mutual funds are offered at brokerage firms, mutual fund companies, banks, and insurance companies.

The greatest benefit of mutual funds is that investors can save countless hours of time, energy and frustration involved with the research and analysis required to find quality investments to hold in a portfolio. Although mutual funds are relatively simple to use, they are not for everyone and investors should be careful to select the best funds that align with their goals and tolerance for risk.