close
To track your progress

WhatsApp
lug

menu icon
Back
Exit Guide

Introduction to Mutual Funds

What is a Mutual Fund?

A mutual fund collects investors’ (your) money put into several different assets (like shares, debt, gold) of different companies.

Let’s understand what this means.

  • A mutual fund collects money from several investors

 

  • It puts the money into various assets like shares, debt and gold

 

  • It invests in shares and bonds of different companies through a single fund

What is a Mutual Fund?

Here is an example-

  • Icon

    Suppose you invest in a mutual fund called Canara Robeco Equity Hybrid Fund.

  • Icon

    This fund collects money from many investors like you.

  • Icon

    It invests that money in both shares and debt.

  • Icon
    • The fund invests in shares of other companies like Infosys, ICICI, Axis Bank, TCS, Bajaj Finance etc.
    • The fund also invests in the bonds of companies like HDFC, LIC Housing, L&T, etc.
  • Icon

    Therefore, if you separately plan to buy these shares and bonds, you will have to spend a lot of money.

  • Icon

    With mutual funds, you can invest in the shares and bonds of all these companies with a minimum investment of just ₹500.

Who distributes the investor’s money into these assets?

Who distributes the investor’s money into these assets?

  • A fund manager manages a mutual fund

 

  • The fund manager decides the proportion of the fund to be invested in which company or which asset

 

  • The fund manager also can change the list of companies the mutual fund is investing in

 

  • By doing this, the fund manager does not disturb the percentage of money that is put into an asset

 

  • All the information related to these actions is mentioned in the fund information document. It is transparently made available to the investors

Similarly, a mutual fund can invest only in a single asset also.

For example, debt mutual funds invest only in debt-based investments.

Do you know?

You can invest in the entire SENSEX with a single ₹500 investment

  • Yes, this can be done by investing in index mutual funds

 

  • These funds simply invest in all the stocks listed in the index

Quick Tip

  • As the index value or the value of Nifty or SENSEX increases, your returns increase. As their value decreases, your portfolio returns decrease

 

  • Therefore, you can invest in an entire index like Nifty or SENSEX through mutual funds

Quick Tip

  • An index can either have shares, debt, or gold. As the index mutual funds copy the performance and structure of the index, they can also invest in a single asset

 

  • This asset can be completely shares or equities, or they can be completely debt or completely gold investments

It sounds interesting, isn’t it? Keep reading to know more about mutual funds.

Next section will tell us about how do mutual fund investments work

Next Chapter