Mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities. These investors may be retail or institutional in nature. Mutual funds have advantages and disadvantages compared to direct investing in individual securities. The primary advantages of mutual funds are that they provide economies of scale, a higher level of diversification, they provide liquidity, and they are managed by professional investors. On the negative side, investors in a mutual fund must pay various fees and expenses. It remains unclear whether mutual fund management can reliably produce an increase in investment returns exceeding these fees and expenses.[1][2]

Primary structures of mutual funds include open-end fundsunit investment trusts, and closed-end fundsExchange-traded funds (ETFs) are open-end funds or unit investment trusts that trade on an exchange. Mutual funds are also classified by their principal investments as money market funds, bond or fixed income funds, stock or equity funds, hybrid funds or other. Funds may also be categorized as index funds, which are passively managed funds that match the performance of an index, or actively managed funds. Hedge fundsare not mutual funds; hedge funds cannot be sold to the general public and are subject to different government regulations.

Mutual Funds Based on Asset Class
  • Equity Funds.
  • Debt Funds.
  • Money Market Funds.
  • Hybrid or Balanced Funds.
  • Sector Funds.
  • Index Funds.
  • Tax-Saving Funds.
  • Funds of Funds.