Simply put, mutual funds are collections (portfolios) of stocks and/or bonds that a company puts together and manages.  Then, you can buy shares in the fund and own a little of all those things.  You are, basically, giving your money to someone else to invest for you.

This is a fantastic way to stay diversified -- to have a little of a lot of different things.

The people who manage these funds are experts and will, usually do much better at investing than you would on your own.  It's their full-time job.  Unless you have a lot of time and expertise to buy and sell hundreds of stocks each year, mutual funds are really the way to go.

Mutual funds are really for people who want to "buy and hold" -- you should plan on keeping mutual funds for, at least, three years.  (This is because of the fees you'll read about in the next lesson.)

As with stocks, there are a lot of differences and important things to check out...  There are terrible mutual funds and there are great mutual funds.  Check out the next lessons for all the details.