Instead of picking every security yourself, you buy units in a fund run by professional managers under a stated mandate. Your return is the fund’s portfolio performance after fees. Funds can focus on equities, bonds, mixed assets, or a market index. They offer diversification at modest ticket sizes, but fees and manager choices still matter. Past performance does not guarantee future results, and you can lose money.
Key takeaways
- Pooling is the core idea: shared portfolio, shared results.
- Read the objective, fees, and risk profile before you invest.
- Index tracking funds aim to match a benchmark; active funds try to beat one.
- Liquidity rules differ; know how and when you can redeem.