Mutual Funds

A mutual fund pools money from many investors to buy a diversified basket of stocks, bonds, or other securities, managed by a professional fund manager on behalf of shareholders. Actively managed funds aim to beat a benchmark index through security selection and typically charge higher expense ratios to cover that research and trading; passively managed index funds instead track a benchmark at a much lower cost, and the majority of active funds underperform their benchmark over long periods once fees are counted. Unlike ETFs, mutual fund shares are priced and traded once per day at the fund's net asset value rather than continuously throughout the trading session, and some funds carry minimum investment requirements or sales loads worth checking before buying in.