A mutual fund is nothing but a collection of bonds, stocks, and other such securities owned by a group of investors and managed by a professional investment company. It is difficult for an individual investor to have a diversified portfolio, but mutual funds simultaneously help investors come together and invest in equity and debt securities. Investors simply invest their money in mutual funds and become the unit holder of corresponding units. The mutual funds invest this money in different securities to earn dividends or interest which is then distributed to the unitholders. The unitholders can get capital gains if the fund makes money by selling stocks, and so on.