What are Mutual Funds?

Mutual Funds are financial vehicles that hold 'shares' of various successful organisations that contribute to the Nation’s economy. The shares of such organisations are listed by the stock exchange, like NSE or BSE. When you invest in Mutual Funds you get to buy shares of such successful companies. As these companies earn profit a part of their earning goes to you and increases the amount of your investment.

Mutual funds are run by AMCs or Asset Management Company that pools in money from different investors and invests the same in bonds, equity, securities and several money market instruments. Each of the investors is assigned with a specific number of units in accordance with the invested amount and shares the gain or loss in that specific unit in proportion to the investment made.

With MFs you earn money in three possible ways –

  1. The share price of the fund increases
  2. The price of the securities increase
  3. Income earned from the dividend and interest from stocks and bonds respectively