What are mutual funds? How do they work?

Mutual Fund is a type of investment where a pool of people buy shares of multiple companies and be a part of the company’s profit and losses. 

There are a number of Asset Management Companies (AMCs) which have many schemes of different nature like equity, debt, tax saving, fixed income etc where people can invest in, majorly two ways – Lump sum (Bulk amount invested in one time) or Systematic Investment Plan (SIP – small amounts of money invested every month)

When you invest in any scheme, you are indirectly buying the shares of multiple companies in which the scheme invests. 

Let’s understand this with an example, if your goal is wealth creation and if you choose to invest in Aditya Birla Sun Life Frontline Equity fund, then your investment is getting diversified in all the companies included in the portfolio of Aditya Birla Sun Life Frontline Equity Fund like Infosys, HDFC Bank, State Bank of India, Tech Mahindra Ltd etc. 

Also, the funds are managed by experienced Fund Managers so that you can get the best returns according to your investment goal. 

Therefore, you can relax when you invest in Mutual Funds.

If you want more personalized advice, feel free to contact Financial Friend – The Most Trusted Financial Planner.