mutual fund is like a big money pool where many people invest together. This money is managed by a professional called a fund manager, who invests it in stocks, bonds, gold, or other assets depending on the fund’s goal.
How Do They Work?
- You put your money into a mutual fund.
- The fund manager takes care of where to invest it.
- The profits (or losses) are shared among all investors based on how much they’ve invested.
So basically, you don’t have to worry about picking the right stocks or bonds yourself the expert does that for you.
Let’s understand with a Good Example
Imagine you and 9 friends each have ₹1,000 and want to try different flavors of expensive ice cream from around the world. But each scoop costs ₹10,000!
So, you all pool your ₹1,000 into one big pot = ₹10,000 total.
You then hire an ice cream expert (let’s call them the Fund Manager 😄) to buy the best combination of ice cream scoops that everyone can enjoy.
- If the expert picks good flavors that increase in value (maybe rare flavors), everyone gets a share of the profit.
- If not, the value goes down, and you may get less than ₹1,000 when you take your money out.
That’s exactly how a mutual fund works!
Benefits of Mutual Funds
- Easy & beginner-friendly – No need to be a market expert.
- Diversification – Your money is invested in many things, so risk is lower.
- Affordable – You can start with as little as ₹500.
- Managed by professionals – Experts handle your money wisely.