How do they work?
Mutual and segregated funds work the same way.
For both investment options, money is pooled together for the benefit of the investors, and to buy a variety of different investments based on the fund’s investment goals. This does two things:
It gives you access to investment managers, which may make it easier for you, since investing on your own can be complicated.
It spreads your money among different investment options, to help reduce investment risk. For instance, if you put all your money in one stock, and it goes down, you could be in trouble. Segregated and mutual funds split money among various investment options held in a single fund, so there’s less risk.