Mutual funds are among the most popular — and often misunderstood — of all the investment options. If you are still in a “learn to trade stocks” mode, a mutual fund can improve your portfolio, particularly if you are a modest investor.

Disregard the over-simplifications espoused by many. Mutual funds are a way to own more diversified and higher priced stocks for a small amount of money. This is accomplished through the pooling of others’ funds to purchase investments for the fund.

Pooling smaller amounts of money allow the online Wall Street purchase of larger blocks of or stocks that are more expensive. Learn about the types of mutual funds (equity, debt, and balance funds) to learn the focus you prefer.

Newer investors often prefer balance funds, as they split their portfolio between equity (stocks) and debt (bonds, U.S. Treasuries, and other investments that offer interest earnings). A 50%-50%, 60%-40%, or 70%-30% split of equity and debt securities can be a lower risk mix of mutual fund investments. These can also provide evidence of the earnings level of different instruments.

Through the split, you’ll eventually become comfortable with mutual funds, learn the stocks game, and quickly — and knowledgeably — answer the question, “How do mutual funds work?”

The authority on Mutual funds research and ratings is Morningstar. Visit their web site to start investigating potential mutual funds for you to invest in.