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➤ A mutual fund is a type of financial intermediary that pools the funds of investors who seek the same general investment objective and invests there in a number of different types of financial claims E,X , equity shares, bonds, money market instruments)
➤These pooled funds provide thousands of investors with proportional ownership of diversified portfolios managed by professional investment managers. The term ‘mutual’ is used in the sense that all its returns, minus its expenses, are shared by the fund’s units
➤It is important to understand that a mutual fund is as risky as the underlying assets in which it invests. Though regulations ensure disciplined investments and ceilings on expenses that are charged to the unit holders, unit holders assume investment or market risk, including the possible loss of principal, because mutual funds invest in securities whose value may rise and fall
➤ Unlike bank deposits, mutual funds are not insured under Deposit Insurance and Credit Guarantee Corporation Act, 1961 Of course there is also an upside to investment or market risk. Generally speaking, if you aspire for higher returns then you have to take greater risk. One has to evaluate the riskiness of a mutual fund from the assets it invests