So what's a mutual fund and how does it work?

A mutual fund is managed by a company that collects funds from different individuals. As the term says, the fund is mutual - owned by several people.

What happened to the collected funds?

A professional investment manager takes charge of the mutual fund and invest it to several types of investments such as stocks and bonds.

How does an individual profit from this?

Like in stocks, you become a "shareholder." When the investments gain profits you gain your dividends. When investments have losses, your shares will have a lower value.

Isn't this risky?

Risks are everywhere! But I heard a lot of people saying that mutual funds have lower risks because their investments are diversified. I know R. Kiyosaki has a different view when it comes to diversification. I haven't tried this yet and I don't know if it's right for everyone.

Aside from this, the person who takes care of your money is a professional (let's say an expert in financial management). And his/her compensation depends on how well the fund grows. At least we know that the investment manager will do (or at least try) his/her best to gain profits or else, he/she will be affected, too.

So what now?

It's up to you! What do you want to do? I suggest you invest on things you're more comfortable with. If you think mutual fund isn't the right choice for you, then go search for something else. And if you benefit from it, let other people know and be kind to share with them what you know.