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What is a mutual fund?
Updated over a week ago

Mutual funds are a type of investment that pools money together from many different investors. This money is then used to buy a collection of stocks, bonds, or a combination of asset classes, which make up the individual mutual fund. Without a mutual fund, these pooled securities would normally be inaccessible to most individual investors, as their commissions, fees, and minimum purchase amounts would be cost-prohibitive.

Typically, mutual funds are managed by investment companies, like The Vanguard Group. They can also be managed by financial professionals, hedge funds, banks, and other financial institutions.

Why choose mutual funds?

Mutual funds are a popular choice among investors due to common features, such as:

  • Professional management: When you select a mutual fund, you’re also selecting a professional to manage the investments on your behalf. Rather than researching each investment before you buy or sell, you can leave it to the professionals to handle it for you.

  • Diversification: Usually, mutual funds can invest in a wide range of different companies and industries. This diversification generally helps reduce risk and volatility of a portfolio by offsetting losses in one asset class with gains in another asset class.*

  • Low minimum investment: Most mutual funds are affordable and have a relatively low cost for the initial purchase of shares and future purchases, compared to buying individual stocks or bonds. While mutual funds have fees associated with them**, they also allow you to invest in several investments without making individual purchases and trades, which can be costly.

Check out Guideline’s fund menu to learn more about the funds we offer and their related costs.

This information is for illustrative purposes only, and is not intended to be construed as investment or tax advice. All investing involves risk, including the loss of principal. Guideline does not guarantee the performance of any specific investment.
*Diversification does not ensure a profit or guarantee against loss.
**Please see the mutual fund prospectus for more information about costs.

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