What are mutual funds?

[dreamy]

What are mutual funds? Is this an easy way to earn return on your investment? How do they work?

[Steven]

A mutual fund is a special type of investment fund pooling money from many investors and then investing the money into one or more groups of asset classes or industries. There are many different mutual funds, depending on their investment objectives and the industries and sectors they invest in.

Mutual funds are managed by professional investors (fund managers). Most mutual funds charge management fees, which is a drawback. However mutual funds allow small investors to diversify their investments, even if they only have a few 100s of dollars to invest.