Q&A: What is a mutual fund?

A mutual fund is an investment that is made up of various holdings (stocks, bonds, etc.). They often have a specific investment objective (based on an index, market capitalization, sector, region, etc). The purpose of mutual funds is to give the average investor an affordable way to invest in numerous (sometimes hundreds) of companies, bonds, or other investments.

For example, a mutual fund tracking the S&P 500 allows investors to own shares of the 500 biggest companies in the U.S. without having to buy shares of each individual company (which would cost tens of thousands of dollars). Instead, they can just buy a share of the mutual fund for less than $100 while still having the same diversification as owning a share of each of the 500 companies.

Leave A Comment