A mutual fund is a type of professionally-managed collective investment scheme which pools money from many investors to purchase securities Investors in a mutual fund pay the fund’s expenses and a single mutual fund may give investors a choice of different combinations of expenses by offering several different types of share classes.
The investment portfolios of the mutual funds are constantly a subject of adjustment and supervision by a manager. He is responsible for the cash flow forecasts as well as reporting on the investments that will perform well in the future in view of the fond. He will choose between those he deems worthy for the investment objective of the fond. The administration of the mutual fund is done under a contract with a management company, responsible also for the hiring of managers.
Several advantages are notable when the mutual funds are compared with individual stocks` investments. For example, divided among the shareholders of the mutual fund, the transaction costs are lower. A professional fund manager may also contribute to the investors` adequate decisions due to his expertise and dedication to managing the options for investment.