A mutual fund is a pool of money from thousands of small investors and then its manager buys stocks, bonds, or other securities with it. It is an open-ended investment company or trust. When you contribute money to a fund, you get a stake in all its investments. Since most funds allow you to begin investing with as little as a couple thousand dollars, you can attain a diversified portfolio for much less than you could buying individual stocks and bonds. Fund managers ar responsible for managing the portfolio of holdings.
The price for a share of a open-end fund is determined by the net asset value, or NAV, which is the total value of the securities the fund owns divided by the number of shares outstanding. The NAV is the price at which you can buy and sell shares, as long as you don't have to pay a sales commission, or "load." You have to pay loads when you buy from a broker, financial planner, insurance agent, or other adviser.
