Mutual Fund

A mutual fund pools money from many investors to purchase a diversified portfolio of stocks, bonds, or other securities. Each investor owns shares in the fund, representing a portion of the fund's holdings. Mutual funds offer diversification and professional management at a relatively low cost.

There are two main types: actively managed funds (where a fund manager makes investment decisions to outperform a benchmark) and passively managed funds/index funds (which track a market index). Index funds typically have lower fees, known as expense ratios.

Key metrics to evaluate mutual funds include the expense ratio (annual fee as a percentage of assets), historical performance, the fund manager's track record, and the fund's investment objective and strategy. While past performance does not guarantee future results, understanding these factors helps in choosing appropriate funds.