Mutual Funds: What Are They and How to Invest

Investing in mutual funds calls for deciding between active or passive management, choosing where to buy funds, understanding fees and sticking to a plan.

A mutual fund's fees and performance will depend on whether it is actively or passively managed. Passively managed funds invest to align with a specific benchmark. They try to match the performance of a market index (such as the S&P 500), and therefore typically don't require management by a professional. That translates into lower overhead for the fund, which means passive mutual funds often carry lower fees than actively managed funds.

Exchange-traded funds

Actively managed funds have a professional manager or management team making decisions about how to invest the fund's money.