What is a mutual fund?

A mutual fund is an investment vehicle that pools money from multiple investors to purchase a diversified portfolio of stocks, bonds, or other securities. This collective investing approach allows individuals to access a wider array of investment options than they might be able to afford on their own. By pooling resources, investors can benefit from diversification, which helps to spread risk and reduce volatility in their investment portfolio.

In contrast, a mutual fund is not a type of bond, nor is it a single stock investment or solely a real estate investment. While a mutual fund may hold bonds or stocks within its portfolio, it distinctly represents a combination of various investments that are managed by professional portfolio managers. This structure makes it an appealing option for those looking to invest in the financial markets without needing extensive knowledge or experience.