Mutual funds are a type of investment in which many people pool their money to buy an assortment of stocks. By investing in a mutual fund, you get to invest in a variety of companies without having to buy share of each one individually.
It also allows you to buy share in companies that you cannot afford to buy alone. Mutual funds are offered by many investment firms. They are managed by a professional fund manager. They pick stocks for the fund. They make the buy and sell decisions.
You buy shares in a mutual fund in the same way that you would purchase shares of stock. They are many different types of mutual funds that specialize in different industries or countries. There are two basic types: load and no load. "Load" referes to a percentage of the invested amount that the mutual fund company keeps as a fee when you buy shares.
When there is no charge for investing, it's called a no load fun. Mutual fund companies provide a prospectus for each fund that they offer. It's basically a booklet about the fund, explains its investment strategies, etc... Read the prospectus carefully before investing.
An index is a standard meausre of the performance of the stock market as a whole. It's based on the stocks of companies traded on major stock markets. You can find out how well your mutual fund is performing by comparing it to an index.
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