A mutual fund is a popular investment option where money from multiple investors is pooled together to invest in a variety of assets such as equities, bonds, government securities, gold, real estate etc. These investments are managed by a professional fund managers, who leverages their expertise and market knowledge to build and manage the portfolio strategically.

Mutual funds offer small investors the opportunity to own a diversified portfolio of professionally managed securities. The main types of mutual funds include equity funds, debt funds, and hybrid funds, categorized based on the asset class they invest in. Additionally, mutual funds can be classified by their investment strategy, structure, and other factors.

It’s important to note that mutual fund performance is influenced by market volatility. Funds investing in equities, for instance, tend to be more volatile than those focused on debt securities. While mutual funds are a great way to build wealth over time, they do carry some level of risk.

In terms of taxes, returns on mutual funds are taxable according to the investment holding period. Short-term capital gains (STCG) and long-term capital gains (LTCG) are taxed differently, with the rate depending on the asset class. For example, equity funds are taxed uniformly under mutual fund taxation rules.