Defining Mutual Funds

The Mutual fund is defined as "a fund established in the form of a trust by a sponsor, to raise money by the trustees though the sale of units to the public, under one or more schemes for investing in securities in accordance with these regulations." The Mutual Funds collect the savings from small investors, invest them in government and other corporate securities and earn income through interests and dividends besides capital gains. It works on the principle of 'small drops of water make a big ocean'. To get funds from investors, the fund adopts a simple technique. Each fund is divided into a small fraction called 'units' of equal value. Each investor is alloted units in proportion to the size of his investment.