A mutual fund is an entity registered and run by an investment company or investment bank. The shareholders of a mutual fund invest money in the fund, which is run by the professional team who anticipate a high return. Commonly the mutual fund will be diversified in different areas like stocks, bonds, and other options or futures to maximize profits and lower the risk. There are two types of funds; an open-end fund, which allows investors to redeem anytime, and a closed-end fund, which is only traded among investors on the secondary market. All mutual funds are subject to the Securities Act of 1933, the Securities Exchange Act of 1934, and the Investment Company Act of 1940, and are monitored by the SEC.
See also: securities
[Last updated in May of 2022 by the Wex Definitions Team]