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What is a Mutual Fund?

Aktualisiert: 24. Aug. 2023

In simple terms, a mutual fund is an existing portfolio in which you can invest. The money from many different investors is pooled and managed by a fund manager who invests in different asset classes.

These assets can in turn be shares, bonds, real estate or even commodities. The fund manager determines the portfolio, i.e. the composition of these assets, and you receive a share of the entire portfolio. This allows you to invest with relatively little capital and in a wider variety of assets.

Another advantage is that with a fund you can spread your risk. For example, if you invest in only one stock and the stock falls, you may have a big loss.

But if you invest in a fund that includes many different stocks, the risk is reduced.

Mutual funds come in many different types, sizes, and asset classes. For example, you can buy an equity fund that invests in stocks of large, established companies, or a theme fund that focuses on a specific industry, such as energy or technology. There are also funds that invest exclusively in bonds and the various subcategories of bonds.

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