What is a Mutual Fund?
How pooled investing works, who runs it and how you earn.
Updated 27 September 2026 · SEBI rules as of 2026Overview
A mutual fund pools money from many investors and invests it in shares, bonds and other securities according to a stated objective. Each investor owns units; the value of a unit (NAV) moves with the value of the portfolio. Mutual funds in India are set up as trusts and regulated by SEBI.
| Particular | Details |
|---|---|
| Regulator | SEBI |
| Industry body | AMFI |
| Legal form | Trust |
| Investor owns | Units of the scheme |
| Price | NAV declared daily |
Structure of a mutual fund
| Party | Role |
|---|---|
| Sponsor | Sets up the fund; must meet SEBI eligibility |
| Trustees | Protect unit-holders’ interests; oversee the AMC |
| Asset Management Company (AMC) | Manages the money; runs schemes |
| Custodian | Holds securities safely |
| Registrar & Transfer Agent (RTA) | Processes transactions and statements (e.g. CAMS, KFintech) |
How you earn
Rise in portfolio value.
Distributions if you choose IDCW.
Reinvested gains in growth option.
Benefits
- Professional management
- Diversification with small amounts
- Liquidity in open-ended schemes
- SIP discipline and automation
- Transparency — daily NAV, monthly portfolios
- Tax efficiency for equity funds and ELSS
Frequently asked questions
Is a mutual fund safe?
It is regulated but not guaranteed; returns depend on markets.
What is the minimum investment?
Often ₹100–₹500 for SIPs and ₹500–₹5,000 for lump sums, depending on the scheme.
Mutual fund investments are subject to market risks; read all scheme-related documents carefully. Information is educational and may change with SEBI / tax rules — verify with the AMC, AMFI or SEBI. FinancePortal is not an investment adviser.