A mutual fund is a financial instrument which draws money from a plethora of investors This common fund is created with mutual contribution of multiple investors in a variety of assets and securities including debts, equities, government securities, liquid assets like funds, bonds, and others Since all the gains, rewards, risks, profits, and losses resulting from or pertaining to this type of fund is shared by all the contributors according to their investment proportion, it is named as a mutual fund.
In other words, a mutual fund is a professionally-managed trust that pools the savings of many investors and invests them in securities like stocks, bonds, short-term money market instruments and commodities such as precious metals. Investors in a mutual fund have a common financial goal and their money is invested in different asset classes in accordance with the fund’s investment objective. Investments in mutual funds entail comparatively small amounts, giving retail investors the advantage of having finance professionals control their money even if it is a few thousand rupees.
Types of Mutual Funds: