A mutual fund is at its core a managed porfolio of stocks and/or bonds. You can think of a mutual fund as a company that brings together a large group of people and invests their money on their behalf in this portfolio. Each investor owns shares of the mutual fund, which represent a portion of its holdings.
Investing in a share of a mutual fund is different from investing in shares of stock. Unlike stock, mutual fund shares do not give its holders anyvoting rights. A share of a mutual fund represents investments in many different stocks (or other securities) instead of just one holding.
Active Portfolio Management
Investors have two main investment strategies that can be used to generate a return on their investment accounts: active portfolio management and passive portfolio management. These approaches differ in how the account manager utilizes investments held in the portfolio over time. Active portfolio management focuses on outperforming the market compared to a specific benchmark, while passive portfolio management aims to mimic the investment holdings of a particular index.