Mutual fund definition
Mutual fund definition: Mutual funds are simply a collection of stocks managed by a mutual fund manager.
A seasoned veteran in the stock market creates a mutual fund, gets money from investors, and invests the money in a diversified portfolio of stocks and/or bonds and other investments that the manager and his or her team thinks will outperform the market.
Mutual funds have both pro’s and con’s.
On one hand you have a veteran in the stock market taking care of your money, which is a nice luxury. Also he or she is usually investing in a diversified portfolio which means that your returns will not be very volatile.
One the other hand you are devoting your investments, possibly all of the money that you own to someone that you don’t know and that doesn’t know you. You are not going to get ripped off but you should have a working relationship with people who manage your money in theory. Also mutual fund charge many fees which can cut into your returns significantly.