A mutual fund is an investment scheme that pools money from many investors which is further invested by a professional fund manager. The fund manager can invest this pooled money to purchase securities like stocks, bonds, gold, or any combination of these. Every mutual fund works around certain investment objectives and attempts to achieve the same. The fund manager plans the investment accordingly and allocates the asset between stocks and bonds. Combining all, these securities form the portfolio composition of the selected scheme.

The first and foremost step is to decide on how much risk you are willing to take and investment tenure. Once you decide this, you can easily select the best mutual fund for you. At Groww, you can select from different categories of mutual funds such as high return, tax saving, top companies, and much more.

Mutual funds are a good investment for investors looking to diversify their portfolios. Instead of going all-in on one company or industry, a mutual fund invests in different securities to try and minimize your portfolio’s risk.

There are four broad types of mutual funds: Equity (stocks), fixed-income (bonds), money market funds (short-term debt), or both stocks and bonds (balanced or hybrid funds).