What are Mutual Funds?mf

“There’s no rocket science involved with Mutual Funds. They are easy to understand.”

Most people get scared simply hearing the term Mutual Fund, let alone any other financial jargon. But when you look at it closely, there’s really not much to fear and most definitely a lot to gain by simply understanding the fundamentals of Mutual Funds. So to begin the process, let’s go to the absolute start and answer a basic question:

What is a Mutual Fund?

Simply put, the money pooled in by a large number of investors is what makes up a Mutual Fund. This money is then managed by a professional Fund Manager, who uses his investment management skills to invest it in various financial instruments.

As an investor you own units, which basically represent the portion of the fund that you hold, based on the amount invested by you. Therefore, an investor can also be known as a unit holder. The increase in value of the investments along with other incomes earned from it is then passed on to the investors / unit holders in proportion with the number of units owned after deducting applicable expenses, load and taxes.