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Definition

<p style="text-align: justify;">A <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">company</span> which employs professional <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">fund manager</span>s to invest the funds of <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">investors</span> in a variety of assets (such as <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">bonds</span>, <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">equities</span> and <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">property</span>) with the objective of maximising the <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">shareholder</span>s' <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">return</span>s. This is different from a <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">unit trust</span> where investors are buying units, not shares. Mutual funds usually allow shareholders to <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">liquidate</span> their shares whenever they want to, so the investment has good <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">liquidity</span>. The problem is that most mutual funds, like unit trusts, underperform the indexes of the <span class="glossary" style="border-bottom: 1px dotted black; cursor: pointer;">sectors</span> in which they compete.</p>