Mutual Fund
A pooled investment vehicle managed by professionals, collecting money from many investors to buy securities.
Also: pooled investment fund
Definition
A mutual fund is an investment vehicle that pools money from many investors to purchase a diversified portfolio of securities (stocks, bonds, money market instruments) managed by professional fund managers. Unlike ETFs, mutual funds are priced once daily at the close of trading (NAV ”” Net Asset Value) and may be actively or passively managed. Actively managed funds aim to beat benchmark indexes but charge higher fees. Mutual funds offer diversification and professional management accessible to small investors.
Example
“An investor puts $5,000 into a large-cap growth mutual fund; the fund manager allocates across 80 stocks, providing diversification the investor couldn't achieve buying individual shares.”
Usage Examples
- 1
“The team applied mutual fund best practices to improve their investment outcomes significantly.”
- 2
“Understanding mutual fund is essential for anyone building a career in Finance.”
When & How to Use
Use 'Mutual Fund' when working in Investment contexts where a mutual fund is an investment vehicle that pools money from many investors to purchase a diversified portfolio of securities (stocks, bonds, money market instruments) managed by professional fund managers.
- ▸Applying mutual fund principles during a investment project or initiative
- ▸Explaining mutual fund to a junior team member or stakeholder unfamiliar with Finance
- ▸Evaluating options or proposals using mutual fund as a decision-making criterion
Etymology & Origin
The term 'Mutual Fund' derives from professional usage and entered Finance professional usage as the field formalised in the 20th century.
History & Evolution
The concept of mutual fund has evolved alongside Finance. Early practitioners relied on informal methods; structured approaches emerged with the professionalisation of investment in the mid-20th century. Today, mutual fund is a standard part of Finance practice globally.
Synonyms
- pooled investment fund
- collective investment scheme
- open-end fund
Antonyms / Opposites
- closed-end fund
- ETF
Images
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Related Terms
- etf
- nav
- expense-ratio
- active-management