For the people who are not much into finance or commerce would know the only definition of mutual funds is the ad that says ‘Mutual funds are subject to market risks’.
So, here are some basic understanding of mutual funds beyond what you heard in the television advertisement so far.
A Mutual Fund is the amount of money that is invested by a large number of people, also called as investors.
The fund is taken care by a professional fund manager.
A number of investors come together and invest their money in an organization to share common investment goal.
The organization then invests the money in equities, bonds, money market instruments and/or other securities.
Each investor has an ownership of units, which shows that they have a share in the fund’s holdings.
The income or gains that comes from the collective investment is given out in proportion to the investors by calculating Net Asset Value.
By Sahana Iyer