What is an ETF? By Allrates

A mutual fund is a collective pool from investors, operated by money managers who create a diverse portfolio with the funds. Think of it as people coming together to put their money together for stronger investments and lower risk.

The risk is lower because funds are invested in various securities (such as stocks and bonds) so if one investment does poorly, another investment will likely do well and even it out. This means the investors will have lower risk and (hopefully) high reward.

The manager of the mutual fund is usually hired by a board of directors and is a partial owner. Because an expert is in charge of the funds, investors enjoy the benefit and convenience of a professional devoting their time to researching where to allocate funds, without having to actively stay up on the market.

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