What is Mutual Fund?
A mutual fund is a collective investment vehicle that gathers and pools money from multiple investors to invest in various assets such as equities, bonds, government securities, and money market instruments. Professional fund managers utilize the funds collected in mutual fund schemes to invest in stocks and bonds, among other things, tailored to the scheme's investment objective. The income or gains generated by this collective investment scheme are distributed equitably among the investors after deducting appropriate expenses and taxes, based on the scheme's "Net Asset Value" or NAV. In return, mutual funds charge a nominal fee, which is regulated and subject to limits set by SEBI to ensure transparency and fairness in the management of these schemes. For those considering personalized financial planning, mutual funds in India, which are incorporated as Trusts under the Indian Trust Act of 1882 and the SEBI (Mutual Funds) Regulations of 1996, also offer the option of Systematic Investment Plans (SIP) to help investors build wealth over time. In summary, a mutual fund is essentially a pool of money provided by multiple investors and managed by a professional fund manager, making it a vital component of investment strategies including insurance and retirement planning.
