A mutual fund is a trust that pools the savings of a number of investors who share a common financial goal. This pooled money is invested by the Asset Management Company (AMC) into different asset classes like equity, debt, money market instruments and other securities as defined by the investment objective. The funds add value to the investment in two ways – income earned and capital appreciation realised through sale. This is shared by the unit holders in proportion to the number of units owned by them. For example, an equity fund would invest in equity and equity-related instruments and a debt fund would invest in bonds, money market instruments etc.