What are Mutual Funds?

what are mutual fund

A Mutual Fund is a professionally-managed trust, where the savings from many investors are collectively invested as one. This money is then invested in various securities such as stocks, bonds, short-term money market instruments and commodities such as precious metals.

Investors in a mutual fund have a common financial goal. Based on this, as well as the fund’s investment objective, their money is invested in different asset classes. Because the funds are well diversified, they tend to offset potential losses.

The amount that you need to invest in mutual funds is comparatively lesser than other instruments. But even when they’re investing only a few thousand rupees, retail investors get the advantage of having seasoned finance professionals manage their money. Mutual funds are either actively managed by professional fund managers or passively tracked by an index or industry.

They’re a great option for investors who lack the time or knowledge to make traditional and usually complex investment decisions. This way they can manage their savings passively without paying high fees. But that also means that by putting your money in a mutual fund, you permit the portfolio manager to make those essential decisions for you.