A mutual fund is a professionally managed investment vehicle that pools money from many investors to purchase securities (stocks, bonds, money market instruments etc.). A money manager then decides how the funds are invested so you don’t have to – but you pay for it. A mutual fund’s management and operational fees, known as the management expense ration (MER), are deducted from the return on your investment.
While it is tempting to think that a mutual fund is a hedge fund…it’s also incorrect. Mutual funds aren’t hedge funds because mutual funds can be sold to the general public - unlike hedge funds.
There are many kinds of mutual funds:
Specialty funds that focus on particular market sector (energy, health, etc.)
Index funds (which track a market index like the S&P 500)
Real estate funds