How does a Mutual funds works?

A mutual fund is managed by an Asset Management Company (AMC). Professional investors, who study where and when to make investments staff the AMC. The AMC creates a mutual fund, and invites the public to subscribe in the mutual fund with their investment. The funds collected are then invested by the AMC and are continually managed.

Unlike other investments, the mutual fund itself is not traded nor does it offer guaranteed returns like a deposit. The mutual fund's Net Asset Value (NAV) determines the value of the investment. Investors redeem their investments in the mutual fund on the basis of the NAV from the mutual fund itself.

Equally, when investors want to buy, they buy into the mutual fund on the basis of the NAV.The investments are managed by professionals who know more about deciding what to buy and sell and when to buy and sell

The risks and rewards of investments are spread across a large number of individuals, so losses are minimizedAccess to funds is quick, since there is no need to sell or buy from the market