Once you've decided to invest in the stock market, mutual funds are actually an easy way to own stocks without worrying about choosing individual stocks (if you are not confident in your investing skills) .
As an added bonus, you can find plenty of information on the Internet to help you learn about, study, select, and purchase them.
But what is a mutual fund?
Well, It's not complicated.
A general description of a mutual fund might be something like this:
a single portfolio of stocks, bonds, and/or cash managed by an investment company on behalf of many investors.
In other words, The management of the fund is the responsibility of the investment company, by selling shares in the fund to individual investors. When you invest in a mutual fund, you become a part owner of a large investment portfolio, along with all the other shareholders of the fund.
When you purchase shares, the fund you invested to purchase the share is channeled by the fund manager along with the money contributed by the other shareholders to invest in the portfolio put together by the fund manager himself/themselves.
Every day, the fund manager counts up the value of all the fund's holdings, figures out how many shares have been purchased by shareholders, and then calculates the Net Asset Value (NAV) of the mutual fund, the price of a single share of the fund on that day.
If you want to buy shares, you just send the manager your money, and they will issue new shares for you at the most recent price. This routine is repeated every day on a never-ending basis, which is why mutual funds are sometimes known as "open-end funds."
If the fund manager is doing a good job, the NAV of the fund will usually get bigger (Value appreciate)
Then your shares will be worth more.
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