What is a Mutual Fund? How a Retail investor can invest in Mutual Fund scheme in India?
In simple terms, Mutual Fund is a collective investment vehicle where the money is pooled from different investors who buys units of the scheme at a particular place which is then invested in Stocks, Corporate bonds, Govt T-Bills, Money Market instruments and Loans etc., Mutual Funds are managed by a Asset Management Company who charge a percentage of the funds as their expense ratio which would be used by pay for the expenses of managing the scheme. There are different types of Mutual Fund schemes one can invest based on their choice.
In short, instead of directly investing in stock market, government bonds, corporate bonds one can invest in them and achieve good returns using these mutual funds. There are several mutual funds schemes from which one can choose from based on the choice of the investor.
For a young investor who likes to take investor, they can choose equity whereas a middle aged investor can choose a balanced or a hybrid fund whereas a investor nearing retirement age can park their funds in Gilt or Debt funds.