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StockCram is not a broker-dealer, investment adviser, or financial institution. All content is for educational and informational purposes only and should not be construed as personalized investment advice. Consult a qualified financial professional before making investment decisions. Past performance does not guarantee future results.Simple Definition
Money pooled from many investors to buy a collection of stocks or bonds.
Why It Matters
Mutual funds were the original way to get instant diversification - they've been around since 1924. Today, they manage over $20 trillion. The catch: many mutual funds charge 1%+ fees yearly and most underperform simple index funds. Still, they're the only option in many 401(k) plans, so understanding them matters.
Key Points
- Unlike ETFs, mutual funds only trade once per day after markets close
- Actively managed funds have a manager picking stocks; index mutual funds just track an index
- Expense ratio matters: 1% fee vs 0.03% fee costs you $170,000+ over 30 years on a $100k investment
Related Terms
Common Questions
Money pooled from many investors to buy a collection of stocks or bonds. Mutual funds were the original way to get instant diversification - they've been around since 1924. Today, they manage over $20 trillion.
Mutual funds were the original way to get instant diversification - they've been around since 1924. Today, they manage over $20 trillion. The catch: many mutual funds charge 1%+ fees yearly and most underperform simple index funds. Still, they're the only option in many 401(k) plans, so understanding them matters.
Unlike ETFs, mutual funds only trade once per day after markets close
Actively managed funds have a manager picking stocks; index mutual funds just track an index
Expense ratio matters: 1% fee vs 0.03% fee costs you $170,000+ over 30 years on a $100k investment