What is Mutual Fund?

Mutual Fund

Mutual Fund

Mutual fund - We all have a lot of options to invest our savings money, Mutual fund is also a medium for investors to invest. The way investors invest in any other type of investment, such as fixed deposits, recurring deposits (RD), and they hope to make a profit from it over time. In a similar vein, Mutual Fund Investment is also an excellent investment option, where investors can make better profits by investing.

We all want to make more profit by investing with minimum Risk.

And in such a situation, MUTUAL FUND is seen as a high earning making in a minimum Risk. It is worth noting that, like any other investment, there is some risk in the "Mutual Fund", an investor must keep complete information about all the risks associated with any investment. 

Let us now try to understand Mutual Fund in a little detail -


Mutual fund is made up of two words - Mutual and fund. The Hindi meaning of Mutual is - mutual, mixed, mutual relation, And fund means - money (money collected together). In this way Mutual Fund means - a lot of people were gathered together - mutual funds.

Mutual fund is also called MF in short

In this way, the money deposited from different investors is invested in stock market and government or corporate bonds, etc., as per the objective and condition already stated in that mutual fund. 

In other words,

A Mutual fund is an investment program in which a large FUND is adjusted by pooling people's money together
And this FUND is invested by the manager of the mutual fund in a very well planned and diversified way, in different investment options, And in this way, the profit from the investment is distributed among all the investors in the proportion invested by them.


Mutual Fund is a Unit Investment System. Mutual fund is an system of investment program where investments are made, invested in various investors, and units are offered to investors for the purpose of earning a deposit.

MUTUAL FUND UNIT AND MUTUAL FUND UNIT HOLDER. And thus the investor of the Mutual fund is called the unit holder or owner. The unit provided to a mutual fund investor has a value, also known as the mutual fund unit price. And this price is changing daily, which tells the profit or loss to the investor in the mutual fund.

New Fund Offer - NFO

Any mutual fund scheme, in which a donation made to the public to invest in the program for the first time, is called a NEW FUND OFFER.

NFO is an contribution similar to the IPO of the stock market
In NFO, investors are offered UNIT of MUTUAL FUND in a fixed PRICE. For example, if SBI brings a latest mutual fund scheme, then KEY INFORMATION, Scheme Offer Document and leaflets can be found on its website.

Where all information related to the offer is available. It is to be noted that, NFO also has a minimum investment AMOUNT, like - 4000, or 1000 rupees.

And the NFO opens for a few days, then becomes CLOSED. Once the NFO is CLOSE, suppose The company collected Rs 2 crore from the NFO, and had a unit PRICE of Rs 16. So in this way there are total units, 1250000 lakhs. And if I put 4000 rupees in NFO, then I will get 250 units.

Now let's say,

That mutual fund invested its offer document in the manner described and after a year, it has a profit of 2 crore deposited from NFO, 50 lakhs. So in this way, the profit of 50 lakhs will be distributed among all the units. And thus, in 1250000 lakh units, each got a profit of Rs. 4 per unit. And after one year, I will get 4 rupees profit on the 250 units that I have, then my total profit will be - 250 * 4 = 800.

And after 1 year, the price of one unit of that mutual fund will be Rs. 24. And if after 1 year, a friend of mine wants to invest in the same mutual fund, then he will have to invest Rs 24 per unit.

Mutual FUND is a diversified investment

The special thing about Mutual Fund is that, Mutual Fund invests the money deposited from different people in the stock market of different industries or sectors of different companies in the stock market, with the aim of making a better and more common profit. So that the RISK of investing in the stock market can be controlled by making a profit. 

The main purpose of investing in various stocks is diversity. All stocks do not always move in one direction, sometimes some stock prices rise, then some stock prices decrease, and it always goes on. 

Now such mutual fund, keeping in mind this basic FACT of the stock market, invests in the shares of a company from different industries or sectors, so that if the share price of a company decreases, then the stock of another company Remain uptake.

It can be said that-

The investment risk is controlled by the funds invested by thousands of investors in the mutual fund, by the manager of that mutual fund, in a planned and diversified manner, and investors are striving to achieve regular and better returns.



There is a deep correlation between mutual funds and stock market investment, as most of the money of mutual funds is invested in the stock market. A mutual fund is an indirect way to invest in the stock market

t can also be said that Mutual Fund is an indirect way to invest in the stock market, because whatever money is deposited in the mutual fund, a large portion of this mutual fund is invested in the stock market.

Those who want to invest in the stock market, but they lack information about stock market investment, in such a way, they can invest their money in the stock market through "mutual fund".

Because the mutual fund manager is an expert in the stock market, who, using his knowledge and skills, invests the money of mutual fund investors in the stock market.

This first part of WHAT IS MUTUAL FUND  is all that is available, let's take a break till the next part, Keep learning, Keep Smiling. Friends, if you like this post, then do not forget to comment below.

Also you can visit :

Mutual Fund investment guide for beginners

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