When investors decide to invest in a mutual fund , then money is put in a pool of money from other investors to create a large portfolio so everyone benefits from bigger profits.
Most funds buy a variety of investments like stocks , bonds , or other securities .
Because there is such a variety of different investments in one mutual fund, there is not as much of a risk. Usually if one investment has a bad return, another will make up for that loss. To invest in a mutual fund, an investor buys shares of the fund and becomes a shareholder. The fund then pays out its profits to the shareholders.