Introducing the Mutual Fund Introducing the Mutual Fund Introducing the Mutual Fund

Introducing the Mutual Fund


This is how smart investors diversify their portfolios.

    How mutual funds diversify your portfolio

    You could spend all your waking hours tracking hundreds of companies and industries to stay current with the markets and business sectors.

    Or you could go with a mutual fund.

    This is a hugely popular investment vehicle that owns a bunch of assets. Those can be stocks, bonds, commodities, cash—even other mutual funds. So, when you buy shares in a mutual fund, you indirectly own shares in its underlying assets.

    Mutual funds allow regular people—those of us without millions of dollars to stash in the stock market—to profit from a diversified investment portfolio without much effort or expense. Once your money is in well-balanced mutual funds, you don't need to think about it very often, which is usually the best way to invest.

    Buy or sell any time you like

    Mutual funds date back to the 18th century, when funds were typically closed-end—meaning shares were only sold to a limited number of investors. Most modern mutual funds, developed during the 20th century, are open-end, which means anyone can buy in or sell out at any time.

    Mutual fund shares don't trade on an exchange, like a stock does. Instead, they trade at the end of the day. First, the closing prices of the underlying assets are used to calculate the net asset value (NAV) of the fund's holdings. This figure is divided by the number of shares (less liabilities) to calculate the price per share of the fund. Once the price is set, the fund can issue shares to investors looking to buy, and redeem shares for people looking to sell.

    Understanding mutual funds

    Today there are thousands of mutual funds, holding more than $18 trillion worth of assets in the U.S. alone. Funds typically buy securities in a specific economic sector. For example, a fund might focus on big companies (large-cap), or companies in fast-growing sectors. Another might invest in emerging markets, or energy or government bonds.

    Some of the most popular mutual funds track market indices, such as the Nasdaq-100. Index funds offer a simple, low-fee way to diversify and generate average market returns.

    Vanguard Group founder John Bogle launched the first index fund in 1976. The approach was so revolutionary that it struggled to find investors. But eventually people caught on to the advantages of Bogle's simple, low-fee way to diversify and generate average market returns. Billionaire investor Warren Buffett once said, "If a statue is ever erected to honor the person who has done the most for American investors, the hands-down choice should be Jack Bogle."

    Mutual fund fees: passive vs active

    All mutual funds charge fees for their services. The lowest-cost funds are passively managed, which means they track an index and don't require experts to intervene and make decisions.

    Those experts tend to charge a lot, so actively managed funds charge higher fees.

    Why does that matter?

    Over the decades, even a fraction of 1 percent can mean that tens of thousands of your dollars end up in someone else's pocket.

    Besides, research has shown that over long periods of time, actively managed funds don't outperform passive funds, when factoring in fees. Buffett once bet $1 million that he would make more money investing in a passive index fund, over 10 years, than in a hedge fund. He won by a long shot, and donated the prize to charity.

    How to start investing in mutual funds

    It's easy to invest in mutual funds. If you have a workplace retirement plan, it probably offers several fund choices.

    If you have a brokerage account, you can usually place an online order, using the fund's ticker symbol and the dollar amount you want to invest. Your purchase will go through at the end of the next trading day.

    Another option is to buy shares directly from a mutual fund provider. 

    The list of popular providers includes BlackRock, Fidelity, T. Rowe Price and Vanguard. You can usually visit the fund's website and fill out a form to open an account. You'll save on brokerage fees, but you may have less flexibility to move your holdings around later.

    Whichever option you choose, you can sit back and relax, knowing that with just a few steps you've put cash into diversified investments—an important step toward building your financial future.

    Quarterly Outlook 2024 Q3

    Sandcastle economics

    01 / 05

    • Macro: Sandcastle economics

      Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

      Read article
    • Bonds: What to do until inflation stabilises

      Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

      Read article
    • Equities: Are we blowing bubbles again

      Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

      Read article
    • FX: Risk-on currencies to surge against havens

      Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

      Read article
    • Commodities: Energy and grains in focus as metals pause

      Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

      Read article


    The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

    Please read our disclaimers:
    - Notification on Non-Independent Investment Research (
    - Full disclaimer (

    40 Bank Street, 26th floor
    E14 5DA
    United Kingdom

    Contact Saxo

    Select region

    United Kingdom
    United Kingdom

    Trade Responsibly
    All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
    Additional Key Information Documents are available in our trading platform.

    Saxo is a registered Trading Name of Saxo Capital Markets UK Ltd (‘Saxo’). Saxo is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. Registered in England & Wales.

    This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

    It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo assumes no liability for any loss sustained from trading in accordance with a recommendation.

    Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.

    ©   since 1992