A mutual fund is a financial instrument that pools the money of different people and invests them in financial securities like stocks, bonds, etc. The Asset Management Company (AMC), the company which manages the mutual fund raises money from the public. The AMC then invests the money in various financial securities like stocks, bonds, etc. The securities are selected, keeping in mind the investment objective of the fund.

What does a mutual fund consist of, and how does the process work?

Mrs. A has ₹10,000 and wants to invest money in mutual funds. Mrs. A can invest in a platform like Finhancers, where there is a wide array of schemes to choose from, or a fund-specific website like that of Adithya Birla, ICICI prudential, etc. Mr. A invests the money in an equity fund. If he goes to a specific mutual fund company’s site, then he will need to hop around one house to another. If it’s a platform like Finhancers, you could choose to invest in multiple options in a single platform. The money goes to the mutual fund, which also collects money from other interested investors. This forms a pool of money that is ultimately invested in a set of stocks of the fund house. The returns will be distributed in proportion to their respective unit holdings.

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