What is Mutual Funds?
A mutual fund collects money from many investors and invests it in a diversified portfolio of stocks, bonds, or other securities. Fund managers make investment decisions on behalf of investors. Investors buy "units" or "shares" priced at the fund's Net Asset Value (NAV), calculated daily. Major categories: equity funds, debt/bond funds, hybrid (mixed), index funds (passive), and target-date retirement funds.
Why it matters for investors
Mutual funds democratize professional investment management. Even small investors can own a diversified portfolio of 30+ stocks via a single purchase. In India, mutual funds are particularly popular via SIP (Systematic Investment Plans) โ automatic monthly contributions that benefit from rupee-cost averaging. Globally, the shift from active to low-cost index funds has reshaped the industry.