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Mutual Fund

In short

Pooled investment vehicle priced once daily — the traditional managed fund

A mutual fund pools money from many investors and a professional manager buys stocks on everyone's behalf. Unlike ETFs, they trade only at end-of-day prices. Many are actively managed (trying to beat the market) and charge higher fees.

Mutual funds pool investor capital and are professionally managed. They price at end-of-day NAV (unlike ETFs which trade continuously). Active mutual funds attempt to outperform benchmarks but most underperform after fees. Index mutual funds compete directly with ETFs on cost.

Related concepts

  • ETF (Exchange-Traded Fund) — An ETF is like a basket of stocks that trades on the stock exchange just like a share. Buy one ETF and you might own 500 companies. They combine the diversification of mutual funds with the trading flexibility of stocks.
  • Index Fund — An index fund automatically owns every stock in an index (like the S&P 500). No stock picking. Very low fees. You get the market's return. Studies show 80-90% of active fund managers underperform index funds over 15 years.
  • Active Investing — Active investing means trying to pick stocks or time the market to outperform the index. It requires research, analysis, and discipline. Most active managers fail to beat their benchmark after fees over 15 years.
  • Passive Investing — Passive investing means buying index funds and holding them forever. No stock picking, no market timing. You get exactly what the market returns, minus tiny fees. Research consistently shows it beats most active strategies over the long run.