What are mutual funds?

Mutual funds are investment vehicles that pool money from multiple investors to create a larger fund. This collective investment strategy enables the mutual fund to buy a diversified portfolio of stocks, bonds, or other securities, which would be challenging for individual investors to achieve on their own due to cost constraints or limited access to certain investments. By aggregating investments into a single package, mutual funds provide investors with professional management and diversification, reducing individual risk while allowing access to a broader range of investment opportunities.

The nature of mutual funds makes them suitable for investors who prefer a managed investment approach rather than purchasing individual securities. This characteristic sets them apart from investments that can only be purchased individually, high-risk investments, or exchange-traded securities, which represent different types of investment products with distinct features and purposes.