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What Are Mutual Funds?

We all have heard of mutual funds and also that it can prove to be smart investments for almost all investors. But what actually are mutual funds and how do they yield benefits? Here’s the real Mutual Funds Meaning.

Mutual funds are the most popular among investment types for the common investor as they are simple investments to understand and easy to use. In fact, if you aren’t among the millions of shareholders of mutual funds, then read on to know all about it.

Furthermore the simplicity of investing in Mutual Funds is not only an attractive feature for new investors but the accessibility, versatility and easy–understandable aspect of mutual funds makes powerful investing vehicles for all kinds of investors, including the pros, and can be perfect for a variety of savings and investing objectives, including college and retirement.

Mutual Fund Definition

A mutual fund is an investment security that enables investors to put in their money altogether into one professionally managed investment. Mutual funds maybe invested in stocks, bonds, cash or a combination of the assets. The underlying security types, called holdings, combine to form one mutual fund is also called a portfolio.

As an investor, one may buy mutual fund ‘units’, which represents your share of holdings in one particular scheme. These units may be purchased or redeemed as required at the fund’s current net asset value (NAV). But NAVs keep fluctuating, according to the fund’s holdings. Therefore every investor participates proportionally in the profit or loss of the fund.

Every mutual fund is registered with SEBI. They function under the provisions of strict rules created to protect the interests of the investor.

The advantage of investing via a mutual fund is that it gives access to small investors to professionally-managed, diversified portfolios of equities, bonds and other securities, which otherwise would have been quite difficult to create with small amount of capital.