Definition of "Mutual Fund"

Corporation or trust, managed by an investment adviser, that raises money from shareholders and invests it in securities, such as stocks, bonds, options, commodities and/or money market securities. Registered with the US Securities and Exchange Commission under the Investment Company Act, mutual funds offer investors the advantages of diversification and professional management for which they charge a management fee.

The fund pools the resources of investors by selling its shares to the public and investing the proceeds of such sale in a portfolio of securities designed to achieve the fund's investment objective. All of the owners in the fund shares participate in the gains or losses of the fund. These products can only be sold by registered representatives. Mutual funds are also known as an open-end diversified management investment company.