A mutual fund pools your money along with that of several other investors and invests this money, depending on the type of mutual fund you choose. It invests in different stocks if you choose equity or equity diversified mutual funds, in bonds or fixed income securities, if you choose debt mutual funds and a mix of equity and debt if you choose a balanced mutual fund.
The Company which manages the mutual fund is called an AMC or an asset management Company. An AMC may manage several mutual fund schemes.
The money you and several investors invest in the mutual fund, is managed by a professional called a fund manager, appointed by the AMC. Fees are paid to the fund manager for managing your money, which is deducted from the money, you invest in the mutual fund.
The activities of the AMC are regulated by SEBI (The Securities and Exchange Board of India). You have to pay money when you enter and exit a mutual fund scheme, called the entry load and exit load.
The investor as a share holder of the company also needs to take the risks involved with it. These kinds of mutual funds are suitable for the kind of investors who are willing to take the risks involved and who are aware of the market conditions. Basically Equity Mutual Funds are more suitable for seasoned investors. For an investor investing in Equity Mutual Funds, timing the entry is crucial also equally important is the exiting time. Also picking up the right type of Equity Mutual Fund is very important too.
Depending on the mutual fund scheme that you invest, mutual funds have the following objectives
✓Capital growth
✓Preservation of Capital
✓Steady income
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