ETFs & Funds · Investing Glossary
What Is Mutual Fund?
A pooled investment vehicle managed by a professional fund manager.
The Full Definition
A mutual fund pools money from many investors to buy a diversified portfolio of stocks, bonds, or other assets managed by a professional fund manager. Unlike ETFs, mutual funds are priced once per day after market close and cannot be traded intraday. Most mutual funds are actively managed — a manager tries to beat the market — which results in higher fees and, on average, lower returns than passive index funds over long periods.
Real-World Example
An actively managed large-cap growth mutual fund charging 1.2% expense ratio must outperform a comparable index fund charging 0.03% by more than 1.17% every year just to break even for investors — which most fail to do consistently.