A pooled investment vehicle managed by professionals, holding a basket of securities.
A mutual fund is an investment fund that pools money from many investors to purchase a diversified portfolio of stocks, bonds, or other securities. Professional managers oversee actively managed funds, selecting holdings to outperform benchmarks. Passively managed index funds simply track market indexes. Mutual fund advantages: instant diversification, professional management, and accessible to small investors. Disadvantages: higher expense ratios than ETFs, taxable distributions, and lack of intraday trading (prices set at day's end). Mutual funds are ERISA-regulated and must disclose holdings and risks. For long-term investors, low-cost index mutual funds provide excellent returns with minimal costs.