Mutual Fund

The term "mutual fund" is synonymous with the term "investment fund". Investors can buy into a mutual fund by purchasing shares in the fund in the same way that they would purchase shares in a company.

As with stocks, mutual fund investors benefit from possible profit distributions in the form of dividends. Most (but not all) mutual funds allow investors to sell their shares to other investors (through an online broker, for example).

Open-end funds buy back shares from investors at the going rate upon request. Closed-end funds are not obligated to buy shares back from investors.

More on this topic:
Exchange Traded Funds Explained
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