What is a Mutual Fund?
To many people, Mutual Funds can seem complicated or intimidating. We are going to try and simplify it for you at its very basic level. Essentially, the money pooled in by a number of investors is what makes up a Mutual Fund. This fund is managed by a professional fund manager.
It is a trust that collects money from a number of investors who share a common investment objective. Then, it invests the money in equities, bonds, money market instruments, and/or other securities.
Each investor owns units, which represent a portion of the holdings of the fund. The income/gains generated from this collective investment is distributed proportionately amongst the investors after deducting certain expenses, by calculating a scheme’s “Net Asset Value or NAV”.
Mutual Fund is one of the most viable investment options for an investor as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost.
What are the benefits of investing in Mutual Funds?
-Expert fund management
A consistent savings behavior in high-quality top-rated mutual funds can help create a healthy wealth corpus over the long term.
Disclaimer: The views expressed here are of the author and do not reflect those of Finkompas.