Investing in mutual funds can give you access to a wide range of securities, such as stocks and bonds, with just a single investment.

Mutual funds pool money to create larger investment opportunities with higher returns for anyone who initially invests in the fund.

Mutual funds are categorized as stock, bond, money market, and target-date funds.

How mutual funds work

Mutual funds function similarly to other types of investments. If you want to invest, you go through a brokerage firm. However, they have a few key differentiators. Most are actively managed by a broker instead of passively earning you returns. Plus, they can carry some hefty fees.

Read about the pros and cons of mutual funds.

Mutual funds invest in multiple different companies with money from many investors, while an individual stock represents ownership in a single company and is bought by individual investors.

Mutual fund investors typically must pay a variety of different types of taxes associated with their investment, unless the funds are within tax-advantaged accounts like a 401(k) or IRA.

Mutual funds come with a few associated fees.

Explore a list of the world's largest mutual funds.

Mutual funds were first created and sold in the US in 1924.

ETFs and mutual funds both pool money into a basket of investments—but the key difference between them is that mutual funds trade just once per day after the market closes, while ETFs trade like stocks throughout the day at fluctuating prices.

Contrary to popular belief, random investments can outperform managed funds.

Mutual fund share classes are rankings of different types of services for investors.

Index funds are typically structured as either mutual funds or exchange-traded funds, but investors can manually recreate an index through 'direct indexing.'

There are three main ways to start investing in the bond market

Invest in the boind market through a brokerage, mutual fund or ETF, or the US government. Each has different steps and terms to follow, from starting rates to opening specific accounts. Some bonds are relatively easy to purchase, but the process differs depending on the type of bond you want.

Explore a step-by-step guide for getting started as a retail investor

Instead of purchasing individual stocks and bonds, new investors may want to start in funds that track an index—like the S&P 500—or that hold a group of themed stocks.

Figure out what type of mutual fund is right for you with a tool that lets you compare different mutual funds, from rates to returns.

Open-end and closed-end mutual funds differ in how they create and distribute shares.

Learn how to invest in index funds with this step-by-step guide.

Investors can buy three main types of bonds: government, corporate, and municipal

Each type has variations of its bond offerings with different interest rates, loan lengths, maturity dates, and terms. Each type also carries its own risks and rewards.

Vanguard Group founder Jack Bogle created the first index fund, the Vanguard 500, in 1976—but the fund didn't take off until the 1990s.

The term 'securities' refers to different types of investments, such as stocks or bonds.

ETFs were first created as an alternative to mutual funds, combining the diversification benefits of a mutual fund with the ability to trade throughout the day on a stock exchange.

The difference between stocks and bonds

While more people invest in stocks than bonds, experts say owning both can make for a healthier portfolio. Stocks are considered a riskier investment than bonds, but tend to have higher returns. While bonds might be the safer option, they won’t grow your wealth as quickly.

People often invest in alternative investments to diversify their portfolios

Because alternatives often have little correlation with traditional investments like stocks and bonds, adding them to a traditional portfolio can reduce its overall risk exposure.

Alternative investments can be sorted into seven major categories, according to some experts

These categories include real estate, private equity, private debt, hedge funds, collectibles, and more.

The 'Big Three' asset managers—Vanguard, State Street, and BlackRock—collectively manage more than $30T in assets and are the largest shareholders in roughly 88% of all the companies listed on the S&P 500.

Mutual funds in seven broad categories averaged a 13.1% annual return in 2023.

Explore a guide to investing in alternatives

Investors often use alternative investments, from collectibles to real estate, as a way to diversify their portfolios in case of market volatility. Getting started investing in these alternatives differs depending on the investment.

A bond ETF lets someone invest in multiple bonds through one single fund

There are risks, there are also major perks to buying a bond ETF, like the ability to purchase bonds on the stock market.

Alternative investments can include everything from cryptocurrency to fine art

The financial assets typically fall outside the scope of traditional investments like stocks and bonds, and they’re often intended to diversify investor portfolios.

Explore a guide to 529 college savings plans

Investors put after-tax dollars into these education-earmarked accounts, and like a 401(k) or IRA, they invest them into stocks, bonds, or funds. When it comes time to withdraw, investors do not pay any taxes on distributions. However, the money must be used for approved expenses like college tuition, textbooks, and trade schools.

Retail investors cannot directly invest in private credit funds—but other financial vehicles can offer exposure to the industry

For example, as some US regulations have loosened in recent years, retail investors have begun to get exposure to the private credit market via ETFs that invest in publicly traded financial vehicles with private credit exposure, such as BDCs.

The financial crisis in 2008 had a major impact on many 401(k) plans

Amid the 2008 financial crisis, stocks and bonds cratered as the broader market floundered due to the subprime mortgage crisis. Investors with so-called "target-date" funds—which shift allocations based on the maturation of a fund—shared in the slump, with some funds declining by 20% or more just a year or two away from maturation.

Not all alternative investments are easy to invest in

For instance, some alternative investments are only available to accredited investors or high-net-worth individuals. Others have relatively high fees compared to traditional investments.

The pros of exchange-traded funds include ease of access through brokerage apps and retirement savings accounts

One unexpected perk is that ETFs are typically associated with lower capital gains tax requirements. Read this list to learn more about the benefits of investing in ETFs.

Only half of American workers have retirement accounts, like 401(k) plans, through their current jobs.

Explore a giant ETF database

Given that there are more than 3,000 ETFs trading in the US, the list of options for individual investors may be overwhelming. VettaFi provides a database that allows potential investors to sort funds by sector, region, strategy, fund issuers, and more. It tracks nearly 100 funds focused on general technology but just one that focuses on copper mining.

Fees can eat away at your 401(k)

Every investment plan has an expense ratio—a percentage of the total assets that goes to the investment manager in the form of fees. Because 401(k) plans are so common, and many of their participants are not savvy investors, the relative expense ratio for them has often excessively increased.

A 401(k) plan allows workers to save for retirement without paying taxes until later

With a 401(k) plans you can invest more money now and let it grow with compound interest. Americans have more than $7T invested in these types of accounts.

The price of a mutual fund is based on its net asset value (or NAV).

In the early 2000s, Warren Buffett invested $1M in an index fund to show that passively managed investments would outperform hedge funds—making the point that actively managed funds are not worth the management fees they charge.

Learn how fine jewelry investing works with this beginner's guide.

IRAs and 401(k) plans both help individuals save for retirement, but have their differences

Anyone can open an IRA, but 401(k) plans are accessible only through an employer. These two retirement vehicles also have different contribution limits per year, with 401(k) plans allowing you to contribute significantly more than an IRA.

Some multibillion-dollar pension funds depend on hedge funds

Pensions are responsible for safeguarding the retirement plans of many corporate and government employees alike. Pensions differ from 401(k) plans and sometimes rely on alternative assets, like hedge funds, to insulate their portfolios of billions of dollars from volatility in financial markets. Read the case top pension advisor Cambridge Associates makes for hedge funds.

About 30% of financial advisors opted for fixed and indexed annuities in 2023

An infographic that shows the most common types of investments used by financial advisors with their clients in 2023 also found that nine in 10 advisors used ETFs, and three-quarters invested in cash and cash equivalents.

When compared to stocks and bonds, alternative investments are often less regulated

Alternative investments are also often less liquid than traditional investments; they carry unique risk, return, and tax considerations.

About 98% of companies offering employees a 401(k) plan match employee contributions

Broadly speaking, an employer 401(k) match means that if you invest money into your 401(k), your employer will put cash in, too. But these programs are often fairly nuanced.

A basic guide to retirement savings account options, the IRA and the 401(k)

The two main types of accounts are 401(k) plans and individual retirement accounts (IRAs)—but what do those mean, exactly? There are differences between the two types, as well as the subtypes beneath them.

Investing in bonds comes with a few risks

Think: changes in interest rates that impact the bond’s value, or a bond issuer completely defaulting on a loan. There are steps investors can take to lower their initial and future risk when investing in the bond market, such as checking a company's bond rating before investing.

BlackRock says investor demand and improvements in underlying fund technology have supercharged ETF availability in 2025

Investors are likely most familiar with ETFs that invest in an index or other grouping of stocks. However, BlackRock breaks down a wide variety of options, including commodity ETFs, currency ETFs, and bond ETFs.