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What are mutual funds?

Mutual funds are a pool of investments wherein like-minded people put their money, says Dhirendra Kumar

I have a very academic question. I want to know the fundamental meaning of mutual funds?
- Jayant

Mutual funds are a pool of investment wherein like-minded people put their money. The money is entrusted to a fund manager and you earn the returns in proportion to your investment in the fund. So, whatever be the return, it is distributed proportionately among investors.

Every fund is of different kind and has similar objectives within each set. The business of mutual funds is about managing the money and charging a fee as a small part of the entire amount. It broadly ranges somewhere between 1-2.5 per cent, depending on whether you have invested through an intermediary or directly. This expense is deducted from the NAV every day.