When a Savvy Miss member asked the following question, we turned to Amy Domini for her expert opinion.

My family keeps telling me that I need to invest money for my future. And now my best friend mentioned that she’s been putting money into a mutual fund. What is a mutual fund and what are the benefits of joining one?

A mutual fund is a pool of investments under professional management, and an empowering vehicle for small investors. For most investors, a mutual fund can be a more effective and efficient way of investing than selecting individual stocks or bonds. Because a mutual fund owns a pool of investments, the fund’s value is based on a larger number of securities. As a result, you as an investor are less affected by the performance of each individual security than you would be if you bought securities individually.

Mutual funds provide you with access to highly qualified portfolio management at a reasonable cost. Most mutual funds accept minimum investments of $2,000 to $4,000 and charge an annual service fee of 1% or lower. Whereas most professional financial managers take a much higher commission and don’t accept investments of under $10,000.