A Mutual Fund is basically a pool of funds collected from many investors that is used to invest in securities like stocks and bonds. A Money Manager actively makes investments for the whole fund while leveraging the large pool of money they have to work with. Each shareholder in the Mutual Fund benefits or suffers in proportion to how much they have invested in the fund and can be bought and sold like regular stocks.
Mutual Fund Blues
Unfortunately, most mutual funds fail to outperform the market in any significant way. Because the Money Manager doesn’t work for free, his pay is taken out of the profits and the mutual fund owners get less.
In theory, Mutual Funds are a great investment. But in reality, you’re better off investing in ETF’s or other investments where the return is better.