What is a Mutual Fund?

Simply put, a mutual fund is a pool of money from many investors that is managed by a seasoned portfolio manager. This money is invested in stocks, bonds, short-term money market instruments, other securities or assets, or some combination of these investments.
The combination of holdings (stocks, bonds, short-term money market instruments etc) the mutual fund owns are known as its PORTFOLIO.
Therefore each unit (share) represents an investors proportionate ownership of the fund’s holdings and the income those holdings generate.

Advantages of Mutual Funds

Professional Management: Professional money managers research, select and monitor the performance  of the securities the fund purchases.

Diversification: Have you ever heard of the phrase “Don't put all  your eggs in one basket”? In mutual funds your money is invested across a wide range of companies and industry sectors. This can help lower your risk if a company or sector fails.

Affordability: Mutual funds accommodate investors who don’t have a lot of money to invest by setting relatively inexpensive amounts for initial purchases, subsequent monthly purchases, or both.

Liquidity: Mutual fund investors can readily sell their shares whenever the need arises.

Who Should Invest in Mutual Funds?

Mutual funds can be used by anyone spanning from new to seasoned investors.
There are different types of mutual funds and the kind of funds that an investor should invest in should be based on their investment objectives.
Money market funds are best suited for short term investments. For mid to long term investments, equity funds are preferable. Bond funds and some real estate investment usually yield a steady income stream.