Mutual funds are a type of investment vehicle that pools money from many investors to invest in a diversified portfolio of stocks, bonds, or other securities. These funds are managed by professional fund managers who make decisions on behalf of the investors.

Here's how mutual funds typically work:

1. Investor Contributions: Investors buy shares or units of the mutual fund by investing their money. Each share represents a portion of the total holdings of the fund.

2. Diversification: The money collected from investors is pooled together, and the fund manager uses it to buy a diversified mix of assets, which may include stocks, bonds, cash, and other securities. Diversification helps spread risk and reduces the impact of the poor performance of any single asset on the entire fund.

3. Professional Management: The fund's portfolio is managed by professional investment managers who have expertise in analyzing markets and securities. Their goal is to generate returns for investors by making informed investment decisions.

4. Net Asset Value (NAV): The value of each mutual fund share is calculated daily based on the current market value of the fund's assets. This value is known as the Net Asset Value (NAV). NAV is calculated by dividing the total value of the fund's assets minus liabilities by the number of outstanding shares.

5. Buying and Selling: Investors can buy or sell mutual fund shares directly from the fund company or through a brokerage account. The price at which investors buy or sell shares is based on the NAV at the end of the trading day.

6. Fees and Expenses: Mutual funds may have various fees and expenses, including management fees, sales loads (commission), and operating expenses. It's essential for investors to understand these costs, as they can impact the overall returns of their investments.

7. Types of Mutual Funds: There are various types of mutual funds, catering to different investment objectives and risk profiles. Some common types include equity funds (investing in stocks), bond funds (investing in fixed-income securities), money market funds (short-term, low-risk investments), and balanced funds (a mix of stocks and bonds).

8. Pros and Cons: Mutual funds offer several benefits, such as diversification, professional management, and liquidity (the ability to buy/sell shares daily). However, they also have drawbacks, including fees and the potential for market risk.

9. Regulation: Mutual funds are usually regulated by government authorities to protect investors' interests and ensure transparency and compliance with relevant laws.

Remember, past performance is not indicative of future results, and all investments carry some level of risk. It's essential to conduct thorough research and consider your financial goals and risk tolerance before investing in any mutual fund or investment product. If you're unsure, consider seeking advice from a financial advisor.