How are mutual funds defined?

Mutual funds are defined as a pooled investment managed by professionals that combines money from multiple investors to purchase a diversified portfolio of assets. This structure allows individual investors to buy into a variety of investments—such as stocks, bonds, and other securities—without needing to manage or research these investments directly. The fund is typically managed by an investment company that conducts research, allocates assets, and makes strategic decisions to achieve the fund's objectives.

This collective approach enables investors to share in the potential gains of the entire portfolio, benefiting from diversification that might be difficult to achieve independently. In essence, mutual funds provide access to a professionally managed investment vehicle that leverages the contributions of multiple investors, aligning with the concept of pooled investment.