From Investopedia I understand that a mutual fund is a pool of funds used to invest in various assets.

I am struggling to understand what it is. I wouldn't be able to spot a mutual fund based on this definition.

As an example, is the JPMorgan Emerging Markets Equity Fund an example of a mutual fund?


2 Answers 2


Let's say that you want to invest in the stock market. Choosing and investing in only one stock is risky. You can lower your risk by diversifying, or investing in lots of different stocks. However, you have some problems with this:

  1. When you buy stocks directly, you have to buy whole shares, and you don't have enough money to buy even one whole share of all the stocks you want to invest in.

  2. You aren't even sure which stocks you should buy.

A mutual fund solves both of these problems. You get together with other investors and pool your money together to buy a group of stocks. That way, your investment is diversified in lots of different stocks without having to have enough money to buy whole shares of each one. And the mutual fund has a manager that chooses which stocks the fund will invest in, so you don't have to pick.

There are lots of mutual funds to choose from, with as many different objectives as you can imagine. Some invest in large companies, others small; some invest in a certain sector of companies (utilities or health care, for example), some invest in stocks that pay a dividend, others are focused on growth. Some funds don't invest in stocks at all; they might invest in bonds, real estate, or precious metals. Some funds are actively managed, where the manager actively buys and sells different stocks in the fund continuously (and takes a fee for his services), and others simply invest in a list of stocks and rarely buy or sell (these are called index funds).

To answer your question, yes, the JPMorgan Emerging Markets Equity Fund is a mutual fund. It is an actively-managed stock mutual fund that attempts to invest in growing companies that do business in countries with rapidly developing economies.

  • Looking at this link iii.co.uk/investing/funds/top-10 are all these mutual funds as well then ?
    – Al jabra
    Sep 29, 2016 at 19:32
  • @Aljabra Yes, they are all mutual funds.
    – Ben Miller
    Sep 29, 2016 at 19:36
  • Great thanks, I understand now. When you invest in a mutual fund, is it exactly like investing in a stock or do you have to pay fees to the fund manager etc..?
    – Al jabra
    Sep 29, 2016 at 19:41
  • 2
    @Aljabra Different funds work in different ways. All funds have ongoing fees that are deducted from your investment, but the amount of these fees can vary widely. Some funds have additional fees that are paid when the fund is bought or sold (called loads). As for how to invest, some funds you invest in by sending your investment directly to the fund, and others are traded on the stock market like a stock (called Exchange-Traded Funds, or ETFs).
    – Ben Miller
    Sep 29, 2016 at 19:48
  • 2
    Indexed Mutual Funds buy stocks to mirror one of the indexes out there so that the fund performs the same as the index. This is done in an automated way. So one of the main benefits is that an index fund does not need a manager. Some index funds are also available as an ETF as well.
    – Xalorous
    Sep 30, 2016 at 19:16

The simple answer is: YES, the JP Morgan emerging markets equity fund is a mutual fund.

A mutual fund is a pooling of money from investors to invest in stocks and bonds.

Investors in mutual funds arrive there in different ways. Some get there via their company 401K, others by an IRA, still others as a taxable account. The fund can be sold by the company directly or through a broker.

You can also have a fund of funds. So the investors are other funds.

Some investors are only indirect investors. They are owed a pension by a past or current employer, and the pension fund has invested in a mutual fund.


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