What Is a Mutual Fund?

A mutual fund pools many investors' money into one portfolio run by a professional manager. How mutual funds are priced, what they cost, and how they compare with ETFs.

Glossary term · Last reviewed October 2026

In one sentence

Mutual fund. A fund that pools investors' money and buys and sells its shares directly with investors, at a price set once each business day.

How it works

A mutual fund collects money from many investors and buys a portfolio of stocks, bonds, or other investments. Each investor owns fund shares, and each share's value is the fund's net asset value, or NAV: total assets minus liabilities, divided by the number of shares.

Worked example: a fund's NAV (hypothetical)

Fund's net assets	$100 million
Fund shares outstanding	10 million
NAV per share	$10.00
You invest	$5,000, buying 500 shares

How it's priced

Mutual funds must calculate their NAV at least once every business day, typically after the major US exchanges close, and every order is filled at the next NAV calculated after it's placed. An order placed during the day gets that evening's price.¹ ETFs, by contrast, trade all day on an exchange.

What it costs

Every fund charges an , a yearly percentage of your investment. Some mutual funds also charge sales loads or 12b-1 fees for marketing and distribution, which typically apply to mutual funds, not ETFs.² In a taxable account, a fund's capital gains distributions are generally taxable even if you never sold a share yourself.³

Learn it properly

Mutual Funds vs. ETFsPart 2: What You Can Own · Free

Notes and sources

Investor.gov, U.S. Securities and Exchange Commission. Glossary: Net Asset Value. Checked 2026-09-30. Back to text
Investor.gov, U.S. Securities and Exchange Commission. Mutual Fund and ETF Fees and Expenses: Investor Bulletin. Checked 2026-09-30. Back to text
Investor.gov, U.S. Securities and Exchange Commission. Characteristics of Mutual Funds and Exchange-Traded Funds (ETFs). Checked 2026-09-30. Back to text