A Mutual Fund is a TRUST that pools the savings of a number of investors who share a common financial goal.
The money thus collected is then invested in capital market instruments such as shares, debentures, and other securities. The income earned through these investments and the capital appreciations realized is shared by its unitholders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost.
Advantages of Investing in a Mutual Fund
- Diversified portfolio
- Low Costs
- Professional Management
- Well regulated
- Effortless goal achievement
- Tax benefits on investment as well as maturity
Mutual Funds are categorized based on the risk hierarchy