What are the ways through which mutual fund operates?

Mutual fund is a professionally-managed trust that pools in money from various individuals to invest in securities like stocks, bonds, short-term money market instruments and commodities. The mutual fund is managed by professional fund managers. They make and sell securities based on market analysis and understanding.

Each mutual fund scheme has an investment objective that includes long-term capital growth and regular monthly income, steady returns, and other objectives. The mutual funds are invested according to the investment objective, risk profile, and time horizon. An equity fund might invest in shares to long-term capital growth. A debt mutual fund would invest in corporate bonds and government securities with the aim of delivering steady returns or lower volatility.

A mutual fund in India is established as a trust with a sponsor, trustees and asset management company (AMC) according to the SEBI (Mutual Funds Regulations) Regulations 1996. An Asset Management Company (AMC), is responsible for managing investments and other daily activities of the mutual funds.