What is Mutual Fund? Complete Explanation

A Mutual Fund is a professionally managed collective investment that pools money from many investors and invests the same in stocks, bonds, short-term money market instruments and other securities.

The mutual fund itself is a trust registered under the Indian Trust Act, and is initiated by a sponsor. The sponsor then appoints an asset management company to manage the investment, marketing, accounting and other functions pertaining to the fund.

Every mutual fund has a fund manager who invests the money collected through subscription from different investors on behalf of the investors by buying / selling stocks, bonds etc.

Various funds and schemes with different objectives can be introduced under the umbrella of a single Trust name. Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is reduced.

A mutual fund is required to be registered with Securities and Exchange Board of India which regulates securities markets before it can collect funds from the public. [Via]
 

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