Mutual Fund Investing: A Complete Guide | A Comparison of Beginner and Institutional Perspectives

1. What is a mutual fund?

A mutual fund is a collective investment tool that is managed by professional managers by raising investor funds from fund companies. Its investment scope includes stocks, bonds, money market instruments , etc.

Basic Features

• Professional management : Fund managers are responsible for stock selection, timing and risk control.

• Diversification : Allocate multiple assets within the fund to reduce the risk of a single target.

• Strong liquidity : Most funds can be subscribed and redeemed daily, but liquidation rules must be followed.

2. Main Types of Mutual Funds

1. Active funds : Fund managers try to “beat the market” but with higher fees (1%-2% management fee).

2. Index Fund : Tracks indices such as the S&P 500 and Nasdaq, with low fees (management fees of approximately 0.05%-0.3%).

3. Bond funds : With government bonds and corporate bonds as the main investment targets, the risk is lower than that of stock funds.

4. Money market funds : High liquidity and yields close to the risk-free rate.

5. Hybrid Fund : Dual allocation of stocks and bonds, suitable for conservative investors.

3. Comparison with other investment methods

Conclusion: ETFs are more flexible and have lower fees, while mutual funds are more suitable for long-term investments and non-professional investors.

4. Historical Data and Market Trends

• Size of U.S. mutual funds : As of August 2025, the overall assets under management (AUM) exceeded US$24 trillion , of which the proportion of index funds continued to increase (exceeding 55%).

• Long-term performance :

• The annualized return of the S&P 500 index fund over the past 10 years is ≈ 11% .

• The average annualized return of active stock funds is ≈ 7%-8% , and most fail to outperform the index.

• Emerging trends :

• ESG-themed funds are growing rapidly, with net inflows exceeding US$1.5 trillion in 2024-2025.

• Digital distribution makes mutual funds more accessible to investors in emerging markets.

V. Risks and Precautions

1. Differences in manager capabilities : Fund managers’ stock selection capabilities determine performance, and there is a “Matthew effect.”

2. Fees erode returns : When holding for the long term, high fees can significantly reduce returns.

3. Market systemic risk : The returns in a bull market are good, but the decline in a bear market is still significant.

4. Liquidity pressure : In extreme market environments, some bond funds may face redemption difficulties.

6. Practical Suggestions for Investors

• Long-term allocation of index funds : suitable for most investors, steadily outperforming inflation.

• Short-term or thematic investment : Active funds can be considered, but the proportion should be strictly controlled.

• Pay attention to the fee rate : give priority to low-cost funds with management fees <0.5%.

• Regular review : Review fund performance every six months or a year and compare it with similar rankings.

🔹 Overall Conclusion

Mutual funds are an important bridge for mainstream investors to enter the capital markets . They offer professional management and diversification, but fees and performance variations are not negligible. Considering market trends in 2025, low-fee index funds will remain the preferred choice for long-term investment, while active funds are more suitable as a supplementary investment to seize specific market opportunities.