shares. These could be a particular sector, or country, or type of share. For example, blue chip shares, which are shares in the the top rated companies, are bought, in order to diversify and reduce the risk, the fund will invest in a bundle of different blue chip companies,so if one does badly, another will do well. Another way to explain this is to spread your bets, or not to put all your eggs in one basket. Or all your money, in one companies' shares.
You could also have a European Fund, which holds the best European shares, to diversify, by holding more than just one countries' shares. Then again, you could have a fund that specialises in the mining sector, the energy sector, or the banking sector.
The fund manager who manages each one of these funds with his team makes decisions about which shares they should hold within the Equity Fund.This fund could hold I million dollars, or 100 million dollars.
The investor becomes one of thousands or millions of people, who have their money invested in one of these funds collectively, and gets paid interest, based on how the fund performs.