A mutual Fund is a professionally managed collective investment vehicle that pools money from many investors to buy securities (debt, equity, gold). Umm, it's more like an avenue that lets you diversify your investments across different asset classes and within an asset class. And investors don't have to break their heads over it all on their own, because Mutual Funds offer the big benefit of professional money management expertise.
Mutual Funds also offer investors more flexibility, letting them decide when to start investing and, in most cases, when to withdraw their investments. This makes mutual funds an ideal investment vehicle to plan for one's financial goals. Once an investor knows his financial goals and needs, the amount and the time horizon, he can easily go ahead and select schemes that can help fulfill his objective.
Investing in a mutual fund is like an investment made by a collective. An individual as a single investor is likely to have lesser amount of money at disposal than say, a group of friends put together. Now, let's assume that this group of individuals is a novice in investing and so the group turns over the pooled funds to an expert to make their money work for them.
Mutual fund is an investment vehicle which pools investors' money and invests the same for and on behalf of investors, into stocks, bonds, money market instruments and other assets. The money is received by the AMC with a promise that it will be invested in a particular manner by a professional manager (commonly known as fund managers). The fund managers are expected to honor this promise. The SEBI and the Board of Trustees ensure that this actually happens.