Final answer:
A mutual fund is an investment pool for securities, and an open-end fund is a type of mutual fund that allows for direct share issuance and redemption. These funds offer liquidity and are priced based on NAV, with the potential for diversified, professionally managed portfolios.
Step-by-step explanation:
A mutual fund is an investment vehicle composed of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments, and other assets. The type of mutual fund that issues new shares and redeems existing shares directly with investors, rather than trading on an exchange, is known as an open-end fund. These funds are designed to offer investors liquidity and the shares are priced based on their net asset value (NAV), which is determined at the end of each trading day based on the total value of the fund's portfolio.
Mutual funds can vary significantly in their investment strategies some may focus on specific sectors or regions while others, like index funds, strive to track the performance of a market index. Mutual funds are managed by professional fund managers, who allocate the fund's investments and attempt to produce capital gains or income for the fund's investors.