Investing term

What is Mutual fund?

A pooled fund priced once per day at its net asset value. Shares bought and sold directly with the fund company.

A mutual fund pools money from many investors to buy a portfolio of stocks or bonds, priced once a day after the market closes at its net asset value. You buy and sell directly with the fund company, not on an exchange. It's a long-standing way to own a diversified, professionally run portfolio — though many actively managed ones charge more than index funds and underperform them.

For example

You invest $1,000 in a mutual fund and your order fills at that day's closing NAV — not the live, second-by-second price an ETF would trade at.

Mutual fund is taught hands-on in Stage 6 — Index Funds, ETFs & Mutual Funds.

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Related terms

Active fundA fund whose manager picks stocks in the hope of beating a benchmark.BenchmarkThe reference index a fund compares itself to — e.g. the S&P 500, MSCI World, or Bloomberg Aggregate.Creation/redemptionThe mechanism that keeps ETF prices close to NAV. Authorized participants swap baskets of underlying stocks for ETF shares (or vice versa).DistributionThe income a fund pays out to its shareholders — dividends from stocks held, plus realized capital gains.
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