What are Mutual Funds?
Mutual funds are one of the most popular investment options these days. A mutual fund is an investment vehicle formed when an asset management company (AMC) or fund house pools investments from several individuals and institutional investors with common investment objectives. A fund manager, who is a finance professional, manages the pooled investment. He or she purchases securities such as stocks and bonds that are in line with the investment mandate.
Mutual funds are an excellent investment option for individual investors to get exposure to expert managed portfolios. Also, one can diversify their portfolio by investing in mutual funds as the asset allocation would cover several instruments. Investors would be allocated with fund units based on the amount they spend. Each investor would hence experience profits or losses that are proportional to their investment. The main intention of the fund manager is to provide optimum returns to investors by investing in securities that are in sync with the fund’s objectives. The performance of mutual funds is dependent on the underlying assets.