Mutual funds are created when several people who wish to earn wealth (investors) combine their resources to create a huge investable amount (corpus). This large corpus is then invested into various companies across industries, operating in different sectors of the economy – depending on the type of fund chosen. All the investors of a mutual fund share in its profits, losses, incomes, and expenses in direct proportion to their level of investment.
Companies that create mutual fund schemes are called Fund Houses or Asset Management Companies (AMCs). The professionals who study the markets and pick companies to invest in are called Fund Managers. Fund managers spend a great deal of time analysing markets and studying different sectors of the economy to figure out which companies are most likely to turn a profit – in different time frames – and choose the best option.