6.1. Mutual Funds

The best-known investment company product is the mutual fund, known formally (legally) as an open-end investment company, or sometimes as an open-end management company. A mutual fund is an investment portfolio managed by a professional investment adviser, so mutual funds offer sophisticated investment management that most investors would not be able to achieve on their own.

Mutual funds provide diversification, which protects against nonsystematic risk. Nonsystematic risk is a type of risk that is specific to a company or an industry. For example, a software company faces the risk of not kee