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- [Narrator] What is a mutual fund?
Rather than picking a particular stock,
many people invest in the stock market
by buying a mutual fund,
a portfolio of assets like stocks and bonds
managed by professionals for a management fee.
There are thousands of mutual funds,
but we can broadly break them into two types --
actively managed and passively managed.
As its name suggests,
actively managed funds are actively managed.
Experts pick stocks and bonds and charge fees.
Passive mutual funds, on the other hand,
aren't actively managed.
No one is trying to pick winners or avoid losers.
Passive mutual funds are simply an investment portfolio
of a big basket of stocks, such as the S&P 500,
which is a basket of 500 large stocks
that represent the U.S. economy.
The fees for a passive fund are much lower than an active fund,
since no expert is actively managing the fund.
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Or, to test your knowledge on mutual funds, click here.
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