A mutual fund company collects money from many investors, and invests it in various options like shares, bonds, etc. This fund is managed by professionals who understand the market well, and try to achieve growth by making strategic investments. Investors get units of the mutual fund according to the amount they have invested.

Fund managers are experts who have their pulse on the market and decide on the right pick of stocks, debentures, debt instruments, government securities among others to maximize gains on your investment.

AMC or Asset Management Company is the company that runs and manages mutual funds.

A Systematic Investment Plan (SIP) is a convenient method of investing in mutual funds. Under this plan, an investor contributes a fixed amount towards the mutual fund scheme at regular intervals, and gets units at the prevailing NAV.

Investing in SIP offers two major benefits: –
1. You can start investing with a small amount, and
2. You can average out your investment, as SIP involves buying units at different points of time and at different NAV levels.

Under a Systematic Withdrawal Plan (SWP), an investor redeems a fixed number of mutual fund units at regular intervals.

Rupee cost averaging is one method to save regularly and minimize the effect of market volatility on investments. By investing through methods like SIP, you invest a fixed amount in mutual funds at regular intervals. So, you get more units when the NAV is low and fewer units when it is high. Eventually, your average cost per unit is brought down.

Liquid funds are mutual funds that offer high liquidity. This means, the units of these funds can be sold immediately, and the invested amount can be redeemed quickly.

You do not need a demat account to invest in mutual funds.

Some of the major benefits on investing in a mutual fund are: – Diversification – Professional management – Convenience – Liquidity – Variety of schemes and types – Tax benefits.

Mutual funds invest in a variety of financial instruments such as equities, debt, and government securities to name a few. Note that the value of these investments could fluctuate, thereby influencing your mutual fund NAV. But since the risk is spread among a large pool of individuals you individually take on low risk through diversification and rake in high returns.