Mutual Funds

(The weekly series - Pocket Money - where I explain financial basics in fewer than 200 words. Feel free to make suggestions!)

A mutual fund is a pooled investment where you and lots of other investors put your money together, then a professional fund manager decides what to buy and sell with it.

They might buy stocks, bonds or other assets depending on the agreed strategy and the aim is, obviously, to make a profit. They are trying to beat the market - to do better than just investing in the market as a whole like you do with an ETF or index fund. This is active management and that means they are more expensive.

Most research suggests that active management doesn't beat passive management in the long term, so you'd want to think carefully about whether this aligns with your goals.

They're bought directly from the fund company, not on the stock exchange, and they usually have minimum investment amounts.

Love Eleanor. xxx