What is a Mutual Fund?

A mutual fund is a professionally managed investment scheme that is run by an asset management company (AMC). Mutual funds help small investors to take advantage of professionally-managed, diversified portfolios of equities, bonds, and other securities, which are generally difficult to create with small amounts of capital.

As the name specifies, when you buy a mutual fund, your money is mutually pooled along with other investors. You can put money into a mutual fund by purchasing units or shares of the fund, which basically represents your proportion of holdings in a particular scheme. Investors share the profits and losses of the fund in accordance with their shareholding in the fund.