A mutual fund is a company that pools money from many investors and invests the money in stocks, bonds, short-term money market instruments, other securities and assets, or some combination of these investments. The combined holdings the mutual fund owns are known as its portfolio. Each share represents an investor’s proportionate ownership of the fund’s holdings and the income, those holdings generate. It is a common mode of community investment mobilization. It earns income by interest or dividend or both from the securities it holds.
It deducts fees, operating expenses and a management income and then passes the remainder to wealth holders through dividends on the mutual fund share. The dividend fluctuates with the income on mutual fund investment.