A mutual fund is a professionally managed basket of securities. Each mutual fund has stated investment objectives and the investments the portfolio manager chooses to include within the fund must align with these objectives. For example, you would expect a long-term growth fund to invest in stocks, whereas you would expect an income fund to invest in bonds.

Mutual funds allow investors access to diversification with smaller amounts of money, compared to a portfolio built of individual stock or bond positions, which can require high minimum account balances.

Mutual funds can be either actively managed, meaning the portfolio manager(s) hand select the underlying investments, or passively managed, meaning the portfolio tracks an index or benchmark.

Mutual funds trade once per day, after the market closes, at one specific price.

It’s important to carefully review a mutual fund’s prospectus and understand the investment strategy before investing.