Mutual funds and asset-backed securities (ABS) differ in structure and purpose.
Mutual funds pool money from multiple investors to purchase a diversified portfolio of stocks, bonds, or other assets, managed by professionals. Investors own shares of the fund, benefiting from the collective performance of its holdings.
Asset-backed securities, on the other hand, are financial instruments backed by a pool of underlying assets, such as loans, mortgages, or credit card debt. Investors in ABS receive payments from the cash flows generated by these assets. While mutual funds emphasize diversification, ABS focus on income from specific asset pools.