What is Mutual Fund?

A mutual fund allows individual investors to access a professionally managed, diversified portfolio of securities. When you buy shares in a mutual fund, you're purchasing a piece of the entire fund's holdings. This provides instant diversification, which helps spread risk, as your money is invested across many different companies or bonds, rather than in just a few.

The fund's performance depends on the performance of the underlying assets in its portfolio. Mutual funds charge annual fees, known as expense ratios, to cover management and operational costs. They are popular for retirement savings (like in 401(k) plans) and other long-term goals, as they offer a simple way for non-experts to invest in the markets.