What is a Mutual Fund?
Mutual fund investments are subject to market risks. Please read all the scheme related documents carefully before investing.
You may have heard this phrase before and it might have concerned you!
Risk is what most people associate with Mutual Funds. But that’s far from understanding Mutual Funds and its benefits.
Mutual implies a group of people coming together and Fund means pooling of money.
A Mutual Fund is a professionally managed collective investment product that collects money from multiple investors to invest in stocks, bonds, gold, etc.
In order to help you understand exactly how a mutual fund works, we are going to share a simple example with you. Our friend Ravi is a great investor and understands financial markets well.
Ravi has generated good returns on his personal investments.
Desiring similar returns, his family and friends often turn to him for investment advice. Instead of giving advice, Ravi decides to collect money from them and starts his own fund.
This is exactly how a Mutual fund works. A fund manager collects money from investors and manages the total pool of funds.
A Mutual Fund lets the investors decide when to start, when to withdraw, where to invest, etc without requiring any prerequisite market knowledge.
The invested money is managed by a team of research analysts, traders and fund managers who are working 24X7 to maximize the returns for their investors.
If you invest into a Mutual Fund, you have essentially outsourced the task of managing your money.
Let us understand the key concepts of Mutual Funds in our next section.