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A Mutual Fund is an investment vehicle that pools the savings of a number of investors and invests the same in a variety of different financial instruments, or securities. The income earned through these investments and the capital appreciation realised by the scheme are shared by its unit holders in proportion to the number of units owned by them.

Mutual Funds can thus be considered as financial intermediaries in the investment business that collect funds from the public and invest on behalf of the investors. The losses and gains accrue to the investors only. The investment objectives outlined by a Mutual Fund in its prospectus are binding on the Mutual Fund scheme. The investment objectives specify the class of securities a Mutual Fund can invest in. Mutual Funds invest in various asset classes like equity, bonds, debentures, commercial paper and government securities.