Consider a mutual fund as money pooled by many people. The mutual fund is tightly regulated and monitored by the government (SEBI), so it is safe.
A professional manager manages the pool by buying shares in good performing companies (equity), or lends it to such companies (debt). The profit made by the mutual fund is returned back to the people contributing to the pool, as dividend or an increase in value.
Tip: Keep brokers out when buying a mutual fund; they sell ‘regular plans’. Commissions erode upto 40% of your money over time (though they may appear small at 1% to 1.5% per year). Instead go for commission free ‘direct plans’ from a direct mutual fund platform such as jamawealth.com
