What type of mutual fund typically invests in a diversified group of corporations?

Open-ended mutual funds are designed to pool money from multiple investors to invest in a diversified group of securities, primarily stocks and bonds. They issue shares that are bought and sold at the current net asset value (NAV), which is calculated at the end of each trading day. This structure allows investors to purchase shares directly from the fund and the fund continuously offers new shares, making it a flexible option for investing in a diversified portfolio.

This diversification is crucial because it helps mitigate risk; by spreading investments across various corporations and sectors, investors are less susceptible to the poor performance of any single investment. Open-ended mutual funds are a popular choice for those looking for exposure to a broad range of assets without needing to select individual securities themselves.

Other types of funds, such as hedge funds, exchange-traded funds (ETFs), and closed-end mutual funds, have different investment strategies or structures. Hedge funds often pursue more aggressive investment strategies and may not be open to all investors. Exchange-traded funds are traded on an exchange similar to stocks, providing a different buying and selling mechanism, and their pricing can fluctuate throughout the trading day. Closed-end mutual funds issue a fixed number of shares and trade on exchanges, which means their market price can differ from the NAV, adding