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Business (General)

Research guide for general business topics

What are mutual funds?

In general, a mutual fund is a fund of money authorized by a shareholder as an instrument for investment in the securities of corporations and businesses.

Mutual funds are open-end investment companies that sell securities shares to investors. As the volume of shareholders increase, the pool of invested money grows. These larger pools of money allow for more securities to be purchased (and eventually sold for profit) and are professionally overseen by investment managers.

Often, mutual funds are defined by diversification; that is, they invest smaller amounts of money in a wide-range of securities rather than large amounts in fewer securities -- this helps reduce financial risk in case a security does not perform well.

The above discussion has been adapted from the following sources: