Mutual fund is a professionally managed investment scheme. It is run by an asset management company (AMC) which acts as an intermediary for retail investors. AMCs collect money from a large number of investors and invest it in equity shares, bonds and other types of securities. Each investor, in turn, is assigned a specific number of units proportionate to the invested amount in the fund. The investor is known as the unitholder. The unit holder shares the profits, losses, income and expenses of the fund in proportion to his investment in the fund.
“It's okay to start small but it's important to start over.”
The fund manager will manage the investor's money according to the investment objectives of the scheme. The fund manager aims to generate capital appreciation or regular income by judicious selection of financial instruments to achieve the investment objectives of the mutual fund scheme.
For example, an equity mutual fund will invest in stocks so that investors get capital appreciation over the long term. Debt funds invest in fixed income securities to provide regular income to investors and government bonds to earn higher returns depending on interest rate fluctuations. A balanced fund will invest in a mix of equities and bonds/fixed income to provide higher returns on investment and protect the portfolio during a downturn in the stock market.
