What is a Mutual Fund?

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Definition:

Mutual funds give people a way to invest in a diverse mix of stocks, bonds, or other securities by buying shares of a financial vehicle that’s managed by a professional.

🤔 Understanding mutual funds

Mutual funds are professionally managed financial vehicles that allow people to invest in a portfolio of securities, which may include stocks, bonds, money market instruments and other securities.The investment decisions for mutual funds are made by professional managers, and they’ve become a popular offering in company-sponsored retirement plans. But their convenience isn’t free: Mutual funds come in different share classes with different fees and expenses. The potential risk and rewards of mutual funds are discussed in each fund’s prospectus.

Takeaway

Buying a share in a mutual fund is kind of like buying a pre-packaged salad...

Everyone who owns a share in a mutual fund gets the same mix of investments, whether that’s stocks, bonds, or cash. As the value of the fund as a whole rises or falls in value, each person’s investment fluctuates with it.

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This information is educational, and is not an offer to sell or a solicitation of an offer to buy any security. This information is not a recommendation to buy, hold, or sell an investment or financial product, or take any action. This information is neither individualized nor a research report, and must not serve as the basis for any investment decision. All investments involve risk, including the possible loss of capital. Past performance does not guarantee future results or returns. Before making decisions with legal, tax, or accounting effects, you should consult appropriate professionals. Information is from sources deemed reliable on the date of publication, but Robinhood does not guarantee its accuracy.

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