Mutual Fund

A type of investment in which the funds from investors are pooled and managed together by an investment professional.

The fund company/fund manager usually charges an expense ratio expressed as a percentage of assets each year, compared to the hedge fund managers who draw more compensation from performance.

Most actively managed mutual funds have historically underperformed the S&P 500’s compounded annual return, which is one thing to keep in mind before investing in mutual funds.  Past performance is not indicative of future results and a mutual fund that has been performing well for the past few years may not do so well in the future.