A way to spread and eradicate the risk of losing money
In Share(Stock) market minmum share that you can buy is 1. So, buying a single share of 30 company with strong base needs huge chunks of money, but through Mutual Funds you can buy shares of same companies in lesser/ more quantity as per the amount you have. That EQUITY based Mutual funds. In Share Market you may loose complete amount but in Mutule funds it is not the case if holded on for the right amount of time
There are other funds known as DEBT funds. These are the funds known to park your money, giving higher returns then Saving Bank and yet safer ones. They are basically used when you have amount for small time ( may 3-4 years) or for specific purpose and cannot take risk with that money.
Buying a mutual fund is like buying a small slice of a big pizza. The owner of a mutual fund unit gets a proportional share of the fund’s gains, losses, income and expenses.
Each mutual fund has a specific stated objective
The fund’s objective is laid out in the fund's prospectus, which is the legal document that contains information about the fund, its history, its officers and its performance.
Managed by an Asset Management Company (AMC)
The company that puts together a mutual fund is called an AMC. An AMC may have several mutual fund schemes with similar or varied investment objectives.
The AMC hires a professional money manager, who buys and sells securities in line with the fund's stated objective.
All AMCs Regulated by SEBI, Funds governed by Board of Directors
The Securities and Exchange Board of India (SEBI) mutual fund regulations require that the fund’s objectives are clearly spelt out in the prospectus.
In addition, every mutual fund has a board of directors that is supposed to represent the shareholders' interests, rather than the AMC’s.