What are Mutual Funds?

For most people, mutual funds may seem complicated and scary. We will try to make it simple and clear for you at a very basic level. Actually, mutual funds are created only when the money of many investors is pooled. Fund managers are appointed to manage this fund.

It is a trust that pools the money of a large number of investors who have a common objective. The amount is then invested in various options such as equities, bonds, money market instruments, and/or other securities. Each investor owns units that represent a portion of the fund's ownership. The income/profit generated from this collective investment is distributed among the investors in the right proportion, after calculating the 'Net Asset Value' or NAV of the scheme, some expenses are also deducted from that amount. Simply put, mutual funds are the most viable option for a common man which provides him the opportunity to invest in a wide variety of professionally managed securities, and which also has relatively low costs.