Mutual Fund

Author:

Moneyzine Editor

1 mins

September 25th, 2023

Advertiser Disclosure

Definition

The term mutual fund is used to describe a financial vehicle that allows investors to pool their money together to achieve a predetermined investment objective. Typically, a mutual fund will have a fund manager, who is responsible for aligning the holdings of the fund with the stated investment objective.

Explanation

Mutual funds allow smaller investors to buy into a larger pool of securities. The lower transaction costs (fees) associated with mutual funds allows the investor to enjoy the benefits of a diverse portfolio of stocks and bonds versus the cost of assembling the portfolio from scratch.

Mutual funds offer the investor a wide array of investment objectives. While there are endless combinations, these choices would include:

Growth (capital gains), value (income) and blends of the two; large, mid-sized and small companies in terms of market capitalization; domestic versus international (foreign) stocks; municipal, government, high yield and long-term bonds; commodities; real estate; technology; utilities; industrial; cyclical versus defensive; indexed versus actively managed funds.

Mutual funds also provide the investor with the advantages of diversification, thereby eliminating the risk associated with an individual stock or bond holding.

Related Content

What Can Help You Meet Your Budget While Shopping for Important Items?
Budgeting while ensuring you don't compromise on quality can seem daunting. Whether filling your pantry, updating your wardrobe, or keeping up with the latest tech, smart shopping strategies are crucial for keeping your finances in check.
April 2nd, 2024
How to Make a Million Dollars in 10 Years
Truthfully, this title should actually be “How to Make a Million Dollars in 10 Years Without Going Into Debt", but that is just getting a little too winded for my liking. It’s true though!
December 6th, 2024
How to Apply Maslow’s Hierarchy to Your Money This Year
You might vaguely remember your psychology teacher talking about Maslow. He pointed at a picture of a triangle as you nodded off in the back of the school room.
November 18th, 2024
How to Tackle Multiple Savings Goals
When there’s only so much money to go around, there are often multiple savings goals competing for your money. Think of the young professional who’d like to get a more reliable car, buy a house, and save for retirement. Or consider the young family that’s saving for college, retirement, and a bigger house.
March 22nd, 2024
The Countdown to Early Retirement: 10 Expenses to Eliminate
Dreaming of waving goodbye to the daily grind five years ahead of schedule? The road to early retirement is paved with more than good intentions; it requires a meticulously crafted strategy with surprising twists. It's not solely about what you should be doing—like diligently saving a portion of your income or investing wisely—but also about what you need to stop doing.
March 22nd, 2024