Mutual fund Higher To lower Risk Fund Type Investment Pyramid A Mutual Fund is a company that combines the investment funds of many people with similar investment goals and invests the funds for these people in a wide variety of securities. The individual receives shares of stock in the mutual fund and through the mutual fund are able to enjoy much wider investment diversity than they could otherwise receive. Each shareholder, in effect, owns a part of a diversified portfolio that has been acquired with the pooled money. As the securities held by the fund move up or down in price, the market value of the mutual fund shares moves accordingly. When dividend and interest payments are received by the fund, they are passed on to the mutual fund shareholders and distributed on the basis of prorated ownership. The above is a simple non technical chart of Mutual Fund categories by risk and reward. It should help you ...