What is Mutual Fund?

A mutual fund is a pool of money managed by a professional Fund Manager. It is a trust that collects money from a number of investors who share a common investment objective and invests the same in equities, bonds, money market instruments and/or other securities.

These funds are operated by money managers or fund managers, who by investing in line with the specified investment objective attempt to create growth or appreciation of the amount for investors. Mutual funds are one of the best investments ever created because they are very cost efficient and very easy to invest in (you don’t have to figure out which stocks or bonds to buy).

HOW A MUTUAL FUND WORKS?

Mutual Funds collect money from several investors and all the money put together is then invested. Now, the investments are made based on the theme of the Mutual Fund. For example, large-cap Mutual Funds will only invest in large-cap stocks. So if you have put your money in a large-cap Mutual Fund, then you are aware of where your money is being invested.

WHY INVEST IN MUTUAL FUNDS?

As investment goals vary from person to person – post-retirement expenses, money for children’s education or marriage, house purchase, etc. – the investment products required to achieve these goals too vary. Mutual funds provide certain distinct advantages over investing in individual securities. Mutual funds offer multiple choices for investment across equity shares, corporate bonds, government securities, and money market instruments, providing an excellent avenue for retail investors to participate and benefit from the uptrends in capital markets. The main advantages are that you can invest in a variety of securities for a relatively low cost and leave the investment decisions to a professional manager.