What is a Mutual Fund?

A mutual fund is an investment that allows multiple investors to pool funds together to purchase multiple stocks. A mutual fund is a tool used to diversify a portfolio with the purchase of one unit. A fund manager directs the money into equities that he or she feels will increase in value over time (you hope).

Basically a fund manager chooses multiple stocks, bonds, or commodities (equity) to create a value of the fund. Each equity holding weights the overall price of the mutual fund creating a unit price. The unit price of the fund fluctuates as the price of each equity fluctuates.