What is mutual fund?

Q. What is Mutual Fund?

A: Mutual Fund is an investment vehicle which helps one invests in different asset classes. It could be equity, gold or debt.

If I were to go from here to Pune, I have two options - One is I can drive on my own or I can take a public transport. If I drive on my own, I decide the starting point, I decide the ending point, where I want to stop but I have to put in efforts and I have to own that vehicle.

If I take a public transport, I have to go to a railway station or an airport. There are pre-determine route, there are pre-determine stoppages. Mutual Fund is something like that – where it is pre-determined way in which asset class it will invest – how much quantum will it invest? You have an ease in the sense that it is a collective investment vehicle so there are people traveling with you and hence the cost comes down. At the same time one does not have option of deciding what to invest in, what quantity and when. So, it is like taking a public transport for an investment.