Mutual Funds and Airlines Company

If you have to travel from one country to another, what will you do? Will you pick up a Boeing and take off with entire flight empty? No. For two reasons:

1. You drive a lot round the city but still you are not exactly an expert pilot
2. If you go alone, it will cost a bomb for you to hire a plane and a pilot

So what do you do? You become a part of the group that wishes to go to the same destination (share costs) and hire a pilot (professional to do the job).

This is exactly how mutual funds work. A mutual fund house (the airline company) appoints a professional fund manager (pilot) to pool and invest money from various investors (passengers) with similar investment objective (destination).

Investors get the benefit of MBAs from Harvards and IIMs of the world working for them at a negligible cost.