In general terms, a mutual fund is a company that aggregates money from many people and invests that money in stocks, bonds, other securities or assets, or combinations of these investments.

The combined holdings the mutual fund owns are known as its portfolio and each share represents an investor's proportional ownership of the fund's total holdings and the income those holdings generate.

Roughly 95 million Americans -- or one in two households -- are shareholders in mutual funds, an industry valued around $7 trillion.

Minimum investment requirements on many funds are low enough to allow even the smallest investor to become a shareholder. Individuals can purchase mutual fund shares from the fund itself (usually through a broker for the fund company), rather than buying shares on a secondary market, such as the New York Stock Exchange or the NASDAQ Stock Market.

Though funds have been around since the 1920s, mutual fund investments have soared over the past 20 years. Many Americans prefer investing in mutual funds over individual stocks largely because mutual funds represent an easy and less costly opportunity for the average investor to benefit from income preservation, as well as income and capital growth.

Additionally, a mutual fund by definition offers portfolio diversification and money management by industry professionals who research, select and monitor the performance of the fund in the best interests of the individual investor -- providing them an opportunity for financial success that was once available only to the very wealthy.

-- By Elizabeth Harper, Online NewsHour