A mutual fund is a company that invests its shareholders' money in stocks, bonds and money market instruments. When you buy shares in a fund, your money is combined with that of thousands of other people with similar investment goals. The fund hires a professional investment manager to invest the money and monitor the investments daily to make sure they continue to meet the fund's - and the shareholders' - goals.

Why Are Funds So Popular?
For three basic reasons: professional investment management, diversification and convenience.

Professional Management: A fund lets you take part in the stock and bond markets without worrying about which securities to buy or sell. The fund's investment manager- a person who spends every working hour trying to find the best investments- makes all those decisions for you.

Diversification: While there is not a 100% safe investment, a multimillion-dollar fund can reduce risk by spreading investments among dozens or even hundreds of different securities- an advantage most people could not achieve.

Convenience: The fund does all the bookkeeping for your account. You may invest more money whenever you wish. You may redeem all or a portion of your shares at anytime at the current net asset value.