A mutual fund is an entity that pools the money of many investors -- its unit-holders -- to invest in different securities. Investments may be in shares, debt securities, money market securities or a combination of these. Those securities are professionally managed on behalf of the unit-holders, and each investor holds a pro-rata share of the portfolio i.e. entitled to any profits when the securities are sold, but subject to any losses in value as well.
Based on your goals and your investment horizon, Mutual Funds give you the option to invest your money across various asset classes like equity, debt and gold. This allows you to diversify your investments and strive to reduce your portfolio risk.
The different types of Mutual Funds are as follows: