A mutual fund is a pooled investment, comprised of money gathered from thousands of investors. The funds are spread across a mix of stocks, bonds, and various money market instruments, even cash.
A team of professional money managers oversee the investments of each fund. The holdings of different mutual funds will vary depending on the underlying objective of the fund.
Mutual funds allow investors to diversify their portfolios without requiring large sums of money. Not only are the funds invested across asset classes, but geographical diversification is often a consideration.
Funds can be actively or passively managed, with the latter being a characteristic of an index fund, which tracks an underlying market index.