As the name suggests, 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 appreciation realized are shared by its unit holders 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.

 

When you invest in a mutual fund, you become the shareholder of the selected mutual fund. The fund manager takes the entire pool of money from all of the fund's investors and invests it in a carefully selected range of investments based on specific goals and procedures that are outlined in the fund’s prospectus.

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The fund's value keeps fluctuating from day to day. The NAVs of the funds don’t remain constant. The value of a fund's units i.e. NAVs are updated on a daily basis and are available on the AMC’s website.

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Many factors like change in interest rates, economic trends influence the performance of a mutual fund. When you purchase units in a mutual fund, you agree to pay certain fees and expenses in the form of entry and exit load.