Instead of just buying individual companies, a mutual fund is a basket of a bunch of different securities: stocks or bonds. Anyone can buy into a mutual fund, and it has a low barrier to entry compared with a hedge fund. It’s basically built-in insurance for investing because it’s diversified, so if one stock fails, you are (usually) propped up by another company in the fund to keep your returns slow and steady. And because you are pooling money with other people, you get exposure to a bunch of different investments you wouldn’t have the opportunity to buy into on your own.« Back to Glossary Index
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