A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities. A mutual fund is formed when capital collected from different investors is invested in company shares, stocks or bonds.

Mutual funds have many advantages compared to direct investing in individual securities. The primary advantages of mutual funds are that they provide economies of scale, a higher level of diversification, they provide liquidity, and they are managed by professional investors.

Shared by thousands of investors, a mutual fund is managed collectively to earn the highest possible returns. The person driving this investment vehicle is a professional fund manager.