Mutual Fund is an investment vehicle that is made up of a collection of funds from different investors for the purpose of investing in securities such as bonds, stock market, money market instruments and similar assets. Mutual fund investments are governed by Money Managers or the Fund Managers, who invest to create capital gains and income for the investors.
The underlying rationality of mutual funds is that they deliver diverse investments — in stocks, bonds and cash — without requiring investors to make separate purchases or trades. In short, a mutual fund is nothing more than an assortment of stocks and/or bonds. You can think of it as a house that brings together a crowd of people diversify their investments to generate capital gain. Each investor gets his own portion which depicts a percentage of the holdings of the fund.