Mutual funds are either an investment company, or a fund within an investment company that offers an open-ended, collective investment portfolio.

Mutual funds allow for an investor to leverage their money and mitigate risk by having the fund manager pool their money along with the money from other investors. These funds are then invested in stocks, bonds, money market instruments, or other securities.

The types of mutual funds available are as varied as the securities or investments they put their money into. These run the gamut based on the amount of risk the investors are willing to take and the return they are wanting. Generally speaking, the higher the return on investment, the greater the risk. Junk bonds, for instance, have much higher payouts than treasury bonds, but junk bonds are also riskier.

This benefits the investor as the pooled funds allow for a mutual fund to invest more money into a potentially high returning investment than the individual investor otherwise might be able to participate in. On the flip side, if an investment goes badly, since the loss is spread over numerous investors, individual loss is minimized.

In addition, since mutual funds have (hopefully) professional management running them, it relieves the investor from having to track, analyze, buy, and sell numerous individual securities. In conclusion, a mutual fund can offer an excellent way for a small or individual investor to enjoy returns on their money without the day-to-day hassle of tracking the markets and securities. But, all due diligence and research should be done on a fund before investing. Again, they are as individual as the managers, with varying levels on how aggressive they invest and mitigate risk.