mutual fund

A company that invests its clients' funds in other companies, equities, or securities. The owner of stock in the investment company holds a proportional interest in the investment company based on the number of shares in the portfolio holdings of the company. In this way a small investor may benefit from professional judgment and a much broader range of investments than might be possible individually.

Mutual funds are generally of two types: open-end investment, companies that issue new stock whenever they sell shares to purchasers, and closed-end investment, companies that issue a fixed number of shares that must be purchased through a stock broker. In open-end funds, the investor is not generally committed to hold the stock for a specified period. Closed-end funds are sometimes sold on a contractual basis requiring a minimum investment and holdings kept for a minimum period.