A mutual fund is an investment fund that pools money from many investors to buy a diversified portfolio of securities.
Each investor owns shares or units representing a proportionate interest in the fund’s holdings. The fund may invest in stocks, bonds, money-market instruments, or a mixture of asset classes, according to its stated objective. A professional investment manager typically selects and oversees the investments.
Most mutual funds calculate a net asset value, or NAV, for each share at least once per business day. Investors generally buy or redeem shares directly through the fund at the next calculated NAV, unlike exchange-traded shares that trade continuously during market hours. This distinction is a common source of confusion between mutual funds and ETFs.
Mutual funds can provide diversification and professional management, but they are not guaranteed investments. Their returns are reduced by expenses such as management fees and operating costs, and some funds may charge sales loads or redemption fees. The first modern mutual fund, Massachusetts Investors Trust, began operations in the United States in 1924.