A mutual fund is a pool of money managed by a professional fund manager. It is a trust that collects money from a number of investors who share a common investment objective and invests the same in equities, bonds, money market instruments and/or other securities. Diversification and professional management are so important to mutual funds. Diversification reduces the overall risk borne by the investor without reducing the average return. This, together with the fact that mutual funds provide professional management which free individual investors from managing their own portfolios, makes mutual funds attractive to individuals. As a mutual fund investor, you will receive important benefits, including diversification, professional money management and affordability.