Mutual fund
A pooled fund that issues and cancels its shares directly with investors, at a price set once a day from the value of its holdings.
Also called: open-ended fund · unit trust · OEIC
A mutual fund collects money from many investors and invests it according to a stated objective. It is open-ended: when you invest, the fund creates new shares or units for you, and when you sell, it cancels them and pays you out of its assets. The price is the net asset value per share, usually calculated once a day after markets close, so you do not know the exact price when you place your order. The term is mostly American; in the UK the main equivalents are unit trusts and OEICs, and in the EU most retail funds are UCITS, often set up as SICAVs or similar structures.
Mutual funds can be actively managed or index-tracking, and cover shares, bonds, property or a mix. Their advantage is convenience: professional management, diversification and the ability to invest small regular amounts. Costs vary widely, so compare the ongoing charge and any entry or exit fees, and check whether a platform fee is added on top. One difference from an ETF is that dealing happens only at the daily price, which some investors see as a drawback and others as a useful brake on over-trading.
General education, not personal financial, tax or legal advice.
Guides that go deeper
Where mutual fund comes up in practice.
Index Funds vs. ETFs: What's the Real Difference?
They often track the exact same index and hold nearly identical portfolios — so what actually separates an index mutual fund from an index ETF?
Legendary InvestorsPeter Lynch: "Invest in What You Know" and the Magellan Fund Years
Lynch turned a small, obscure mutual fund into the best-performing fund of its era — then walked away at the top and wrote down exactly how he did it.
ETFs & Index FundsActive ETFs Explained: What's Driving the Shift
Active management has been migrating out of the mutual fund wrapper and into the ETF one. Here's what's driving the shift, and what it doesn't change.