It is an investment vehicle that pools money from multiple investors in order to purchase a diversified portfolio of stocks, bonds, or other securities (according to the stated strategy of the fund).
It enables individual investors to benefit from professionally managed portfolios and possibly exploit economies of scale while spreading risks across multiple investments.
These funds are managed by expert financial professionals, known as fund managers. The skill of such professionals is to examine the investment decisions and implement them subsequently. In return for providing such management services to the fund, the AMC charges an expense ratio while collecting the gains made from this investment into the fund. The gain so collected is divided among the investors in proportion to the money invested by them after deducting the expenses applicable, with the help of the calculation of the Net Asset Value.