A mutual fund is a pooled investment product which invests in securities according to a preset mandate and is available to investors in units. The products are often managed by a fund manager.
MFs differ from each other in their objectives and can be sold as liquid funds, debt funds, large cap equity funds, index funds etc.
The price of a unit of MF is known as the Nav (net asset value).
Investors opt for MFs because they don’t need to have a deep understanding of markets as the investment money is chaperoned by a fund manager.
However, as markets mature and information is freely available, the premise of the fund manager orchestrating returns goes away because there are no extraordinary gains to be had. The involvement of a professional guide necessitates a management fee ranging 2-4 percent of our investment amounts.
MFs do not guarantee a return percentage unlike fixed-income instruments.