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Mutual Fund: What Is A Mutual Fund?

What is mutual fund and how to invest in it

What Is Mutual Fund

"Mutual Fund" has become the general talk of the country amongst all the investors in India recently. After getting tired and bored up with all the traditional Investment tools available in India, now everyone wants to divert their habit of Investment from one pool to another!

All of you might have heard that Mutual Funds gives more return than Fixed Deposits! Mutual Funds can beat Inflation! It helps to create long term wealth for all its investors! etc. etc...

But before going deep inside the ocean of Mutual Funds, first of all let's clear What is a Mutual Fund?

It is not that much complicated to understand this magic tool of Investment. Here, We are going to try and simplify it for you at its very basic level. 

Mutual Fund: Essentially, the money pooled in by a large number of people (or investors) is what makes up a Mutual Fund. This fund is managed by a professional fund manager.

It is a trust that collects money from a number of investors who share a common investment objective. Then, it invests the money in equities, bonds, money market instruments and/or other securities. Each investor owns units, which represent a portion of the holdings of the fund. The income/gains generated from this collective investment is distributed proportionately amongst the investors after deducting certain expenses, by calculating a scheme’s “Net Asset Value” or NAV. 

Simply put, a Mutual Fund is one of the most viable investment options for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost.

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