...that pools together the money of a large number of investors...
...to purchase a variety of securities like stocks or bonds.
When you purchase a share in a mutual fund,...
...you have a small stake of all investments included in that fund.
Think of a mutual fund like a basket of investments.
When you purchase a share in a mutual fund, you are buying one share of this basket,...
...and therefore have a stake in one small fraction of all the investments in that fund.
Suppose there's an investor...
...who wants to invest some of his retirement portfolio in the stock market...
...but he doesn't have time to analyze individual stocks...
...and create a diversified stock portfolio.
Instead, he decides that he'd rather purchase a mutual fund.
This way, the investor can purchase a single investment...
...which will in effect, be similar to purchasing an entire portfolio of stocks.
