What is a Mutual Fund?
A mutual fund is a pool of money collected from many investors to invest in stocks, bonds, or other securities. Think of it like a group bus ride — instead of everyone hiring their own taxi (picking individual stocks), you share a bus that takes everyone in the same direction.
How It Works
- You invest — You put ₹5,000 or ₹50,000 into a fund
- AMC manages — An Asset Management Company (like HDFC AMC, SBI MF) hires a professional fund manager
- Fund manager invests — They use the pooled money to buy a diversified portfolio of stocks/bonds
- You own units — Your ₹10,000 buys "units" at the current NAV price
- Value changes — As the portfolio grows or shrinks, your units gain or lose value
Why Mutual Funds?
- Professional management — Fund managers with 15+ years of experience pick stocks for you
- Diversification — Your ₹5,000 buys exposure to 50+ stocks instead of just 1
- Accessibility — Start with as little as ₹500/month via SIP
- Liquidity — Sell your units any business day (for open-ended funds)
- SEBI regulated — India's Securities and Exchange Board regulates all mutual funds
Key Players
| Entity | Role |
|---|---|
| SEBI | Regulator — sets rules, protects investors |
| AMC | Asset Management Company — manages the fund |
| Fund Manager | Person who makes investment decisions |
| Trustee | Oversees the AMC on behalf of investors |
| Registrar | Handles unit ownership records (CAMS, KFintech) |
| Custodian | Safekeeps the actual securities |