Final answer:
Mutual funds are investment programs where investors pool their money to invest in a diversified portfolio. These funds are managed by professional fund managers and carry risks. Investors buy shares and receive returns based on fund performance.
Step-by-step explanation:
Mutual funds are investment programs where investors pool their money to invest in a diversified portfolio. These funds are managed by professional fund managers, which is a key advantage for investors who may not have the time or knowledge to manage their investments themselves. However, it is important to note that mutual funds do carry risks because they are subject to market fluctuations and the performance of the underlying securities.
Investors buy shares in a mutual fund, which represents their ownership in the fund's assets. The returns on these investments are based on the overall performance of the fund. It is important for investors to research and understand the risks and potential returns associated with a specific mutual fund before investing.