Mutual Funds are trusts that collect money from a number of investors who share common investment objectives. These trusts are managed by Fund Managers. Further, mutual funds invest this money in equities, bonds, money market instruments and/or other securities. And the income or gains generated from this collective investment is distributed proportionately amongst the investors. This is done after deducting applicable expenses and levies, by calculating the scheme’s Net Asset Value or NAV. Simply put, the money pooled in by a large number of investors is what makes up Mutual Funds.
Mutual Funds invest in different asset classes. These classes are debt, equity, gold, combination of these, etc. Equity based funds too have a wide range of offerings like diversified equity funds, sectoral funds, etc. Similarly, debt funds have investments in central government bonds, state government bonds, etc.
Nearly 4000 crores is invested every month via Systematic Investment Plans (SIP), an indicator of the trust and popularity of Mutual Funds in India.