WHAT IS MUTUAL FUND?

Mutual fund is an investment option for investors where pool of money collected from many investors to invest in securities like stocks, bonds, share and other assets. In mutual fund money is collected from different investors and it is managed by professional fund manager. Then the fund manager invest the same money in different stocks, bonds, share and other assets.

Let us understand it by an example. Suppose Mr A who is doctor by profession has some money which he want to invest in stock market. But he is bit confuse because there are thousands of share registered in a stock market. So what he will do now. As he don’t have much time to look upon those thousand shares and do some research. So he did some small reseach and easily find which is best mutual fund. And invested the amount in mutual fund. Like Mr A there are lot of person who invest in mutual fund. Now the fund manager took all those money. Did research and invested the money in best different share according to him. Now fund manager will be continuosly looking upon the shares he has invested the money. He will track the share. And if the share he has invested go down he will shift the money in different share. In those days Mr A dont have to look upon those shares. After some days or year later when Mr A need those money. He can easily withdraw his money with some profit. Fund Manager cut small amount as a expense ratio for his service (max 4%).

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