A Mutual fund is a form of collective investment that pools money from many investors and invests the money in stocks, bonds, short-term money-market instruments, and/or other securities. Legally known (in the US) as an "open-end company," a mutual fund (click here for US SEC definition) is one of three basic types of investment companies available in the US.

The portfolio manager trades the fund's underlying securities, realizing a gain or loss, and collects the dividend or interest income. The investment proceeds are then passed along to the individual investors. There are more mutual funds than there are individual stocks.

Outside of the US, mutual fund is a generic term for various types of collective investment. In the UK and western Europe (including offshore jurisdictions) other forms of collective investment are prevalent including unit trusts, Open-Ended Investment Companies (OEICs), SICAVs and unitized insurance funds.