Quite simply, a mutual fund is a mediator that brings together a group of people and invests their money in stocks, bonds and other securities. Let’s take the example of Equity Mutual Funds.
As a single investor, if you want to invest Rs 10,000 per month in the equities, there are very limited number stocks you can buy. Plus, you won’t be able to build a diversified portfolio of various company shares. Just like you, there are 100’s of other investors who would like to grow their money.
A Mutual Fund (AMC)company pools money from these investors for investment in a particular scheme with a specific objective.E.g. ICICI Prudential is an Asset Management company and ICICI Prudential Focused Bluechip Equity Fund is one of there Mutual Fund schemes in which individuals can invest.
This mutual fund invests in primarily large cap blue chip companies like HDFC Bank, Infosys, Reliance Industries, etc.
A mutual fund is one of the most viable investment options for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. Investing in a mutual fund offers you a gamut of benefits: