Many people do not have either the time or the money to do this properly. For these people, mutual funds may provide an excellent alternative. A mutual fund is a pool of money invested in stocks by a professional fund manager . When you invest in a mutual fund you buy shares of the fund. The proceeds from these shares are then invested in a portfolio of stocks determined by the fund manager.
Most fund managers charge the fund holders a fee or series of fees for managing their money.
When there are profits from the investments, they are returned to the investors through dividends and capital gain distributions. While the particular investments made are left to the fund manager, they are not allowed to freely buy any stock at any time. The manager is governed by the stated investment objectives of the fund. This section focuses on stock-related mutual funds. However, there are bond funds and mixed funds that invest in both.