A Mutual Fund is an investment vehicle that collects money from many investors and invests that money as a combined portfolio.
The fund is managed by a professional fund manager or investment team, which selects investments based on the scheme’s objective.
A mutual fund may invest in:
- Equity shares
- Government or corporate bonds
- Money-market instruments
- Gold or other permitted assets
- A mix of different asset classes
Each investor owns units of the fund rather than directly owning every individual security in the portfolio.
The value of one unit is represented by the Net Asset Value (NAV), which reflects the value of the fund’s investments after accounting for liabilities and expenses.
Mutual funds come in many forms, including equity funds, debt funds, hybrid funds, index funds, and sectoral or thematic funds.
They can help investors achieve diversification, professional management, and convenience, especially when they do not want to select and manage individual securities themselves.
However, mutual funds are market-linked investments. Their value can rise or fall, and returns are not guaranteed.
Investors should consider the fund’s objective, risk level, costs, time horizon, and suitability before investing.