What is a Mutual Fund and How Does it Work?


Today We are going to Learn Below Important aspects of Mutual Funds.

  1. What is a Mutual Fund?
  2. Basics of Mutual Funds.
  3. How Mutual Funds Works.
  4. What are the different types of Mutual Funds.


What is a Mutual Fund?

To put it in a very simple way let’s take a very simple example of this. Assume that I was to go from Pune to Mumbai I have two options. Assume I can take out my own car. I can ride on my own. I can drive on my own. I can enjoy it because I know How to drive. I know What way I have to choose. I know hat are the basic rules. Everything is okay so I’m a well-educated person as far as driving is concerned. So I can choose How to drive. Which way to go. And How to go over the possibility.


On the other hand, If I am not really keen on driving I just want to reach Mumbai that’s it. So What I can do is I can just hire a driver. I hire a professional in short. He takes the decision on Which road to choose and what speed to drive. Where to stop. I keep all the decisions at his discretion I just told him the final destination. That’s exactly the difference between a Stock Market Investment and a Mutual Fund Investment.

In Stock Market Investment, you take your own decisions. You know Where you have to go. How to go. You have expertise in that and you have the enthusiasm. I may say to explore these things but if you are in the second category you’re really not bothered to explore things. You better hire a professional and he will make decisions for you. That’s exactly what a Mutual Fund does. So, In simple words, Mutual Fund means there is a Mutual Fund Manager Who takes decisions on your own money Which is Invested with the mutual fund.