Funds except for Unit Trust of India (UTI) which was created by the UTI Act, are governed by the Securities Exchange Board of India (Mutual Fund) Regulations 1996 All mutual funds have to be compulsorily registered with SEBI.

An investor buys mutual fund 'units', that represent your share of holdings in a particular mutual fund scheme. These units can be bought or redeemed at any time at the current NAV or Net Asset Value of the fund. The NAVs keep fluctuating, depending on the fund's holdings. This essentially means that every investor participates proportionally in the gain or loss of the fund.

All the mutual funds are registered with SEBI, and function strictly within the provisions of the regulations that have been created to protect the best interests of the investor. The greatest advantage of investing through a mutual fund is that even the small investors have access to diversified portfolios of equities, bonds, and securities that are professionally-managed, which are difficult to create with a limited amount of capital.

Mutual Funds are a means for investing in stocks and bonds

Mutual Funds are pools the money from several investors and invest them in stocks, bonds, money market instruments, and other types of securities. While mutual funds are not an alternative investment option to stocks and bonds, it is like buying a small piece of a huge investment. Here the owner of a mutual fund unit actually shares a proportion of the fund’s gains, losses, income, and expenses.

Every mutual fund has a specific stated objective

The objective of every fund is laid out in the prospectus of the fund. It is the legal document that contains information about the fund, its history, its manager, and its performance.

Objectives of a mutual fund are -

Objective Investment

Equity (Growth) Invest only in stocks

Debt (Income) Only in securities with fixed-income

Money Market (including Gilt) Short-term Money market instruments that include government securities

Balanced

To maintain a 'balance' in returns and risk, Part investment is in stocks and part in fixed-income securities.

Mutual Funds are managed by an Asset Management Company (AMC)

The company that manages a mutual fund is called an Asset Management Company or AMC. They may have several mutual fund schemes which have similar or different investment objectives.

The AMC employs a professional money manager, who buys and sells securities that are in line with the fund's stated objective.

AMCs are Regulated by SEBI and Funds governed by Board of Directors

The mutual fund regulations of the Securities and Exchange Board of India (SEBI) require that the objectives of funds are made clear in the prospectus.

Every mutual fund is governed by a board of directors who are supposed to represent the interest of the unit holders rather than the AMC’s.