What is a Mutual Fund?

Mutual fund is a type of investment that allows a group of people (investors) to pool (combine) their money and hire a professional manager. The fund manager then invests this money by buying securities such as stocks, bonds or money market instruments. 


There are two ways to earn in mutual fund: 


1) From the capital gain (increase in value) of the security. 
2) Dividend or interest income. 



These earnings less the charges and expenses (net) are passed on to the shareholders. The value of a share of the mutual fund, called the Net Asset Value (NAV), is calculated daily based on the fund’s total value divided by the total number of outstanding shares.