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Thursday, 30 September 2021


A mutual fund is an open-end professionally managed investment fund that pools money from many investors to purchase securities. Mutual funds are "the largest proportion of equity of U.S. corporations."[1]: 2  Mutual fund investors may be retail or institutional in nature. The term is typically used in the United States, Canada, and India, while similar structures across the globe include the SICAV in Europe ('investment company with variable capital') and open-ended investment company (OEIC) in the UK.

Mutual funds have advantages and disadvantages compared to direct investing in individual securities. The advantages of mutual funds include economies of scale, diversification, liquidity, and professional management.[2] However, these come with mutual fund fees and expenses. Primary structures of mutual funds are open-end funds, unit investment trusts, closed-end funds and exchange-traded funds (ETFs).

Unlike other assets, mutual funds are easy to buy and sell just like stocks which means you can always reliably exit your investment if you need to use that money elsewhere. Since mutual funds are managing a large pool of money, the fund’s ability to invest in hundreds of different companies with relatively smaller brokerage fees provides you with exposure to entire sectors instead of only a handful of companies. 

Mutual funds are often classified by their principal investments as money market funds, bond or fixed income funds, stock or equity funds, hybrid funds, or other. Funds may also be categorized as index funds, which are passively-managed funds that match the performance of an index, or actively- managed funds. Hedge funds are not mutual funds as hedge funds cannot be sold to the general public.

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