Today there are well over 11,000 open-end mutual funds in existence. It seems as if you can't turn a page in a newspaper or a magazine without seeing a company advertising its funds. Legally speaking, mutual funds are corporations or trusts whose sole purpose is to invest their shareholders' assets. The pooling of assets from multiple shareholders allows an entity to diversify more broadly than a single investor would be able to. The ability of an individual investor to inexpensively put his or her eggs in more than one basket, better known as diversification , is one of the major benefits of owning a mutual fund.
Different funds go about selecting stocks or bonds for their portfolios in very different ways.
A goal is established when a fund is created, and the money manager selected to run the fund must comply with the mandate. With a mutual fund, you know, before you get in the door, what your fund's investment objective is. If you want income for retirement, you can find a fund for that. If you want no income but lots of growth potential, you can find a fund for that. If you want a fund that invests only in health-care stocks, you can find one for that, too.