Mutual funds are investment strategies that allow you to pool your money together with other investors to purchase a collection of stocks, bonds, or other securities that might be difficult to recreate on your own. It offers you the simplest way of investing in increasingly complex financial markets. With the advantages of diversification, liquidity, professional management, etc. available with Mutual Funds, you can be sure of peace of mind with regards to the growth of your hard earned money.  Note that mutual fund investors do not actually own the securities in which the fund invests; they only own shares in the fund itself.
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Mutual Fund can be Open End and Closed end funds

Open End Fund:

In simple terms, an open-end mutual fund is when a company aggregates money from many investors and invests the money in stocks, bonds, short-term money-market instruments or other securities. These funds buy and sell units on a continuous basis and, hence, allow investors to enter and exit as per their convenience. The units are bought and sold at the net asset value (NAV) declared by the fund. Investors purchase mutual fund shares directly from the fund itself at a price that is determined by the fund's per-share net asset value (NAV) plus any shareholder fees that the fund imposes at purchase (such as sales loads). Mutual fund shares are "redeemable": when the holder of the mutual fund shares wants to sell those shares, he or she sells them back to the fund (or to a broker acting for the fund) at their approximate NAV minus any fees the fund imposes at that time (such as deferred sales loads or redemption fees). Open-end fund shares cannot be bought or sold in secondary markets, such as the Nepal Stock Exchange. The number of outstanding units goes up or down every time the fund house sells or repurchases the existing units.

Closed Ended Fund:

The unit capital of closed-ended funds is fixed and they sell a specific number of units. Unlike in open-ended funds, investors cannot buy the units of a closed-ended fund after its Initial Offering period is over. This means that new investors cannot enter, nor can existing investors exit till the term of the scheme ends. However, to provide a platform for investors to exit before the term, the fund Manager list their closed-ended schemes on a stock exchange.

Trading on a stock exchange enables investors to buy and sell units through a broker in the same manner as transacting the shares of a company. The units may trade at a premium or discount to the NAV depending on the investors' expectations of the fund's future performance and prospects. The demand and supply of fund units and other market factors also affect their price.

The number of outstanding units of a closed-ended fund does not change as a result of trading on the stock exchange. The closed-ended funds are free from the worry of regular and sudden redemption and their fund managers are not worried about the fund size. 
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​Functions and Duties of Fund Supervisor:

• To assure that the Fund Manager has operated the fund subject to the prevailing laws and agreement,
• To act in interest of the Unit holder.
• To supervise the works of Fund Manager and Depository.
• To examine net worth of the scheme.
• To supervise if the asset and documents under the scheme have been kept safely or not.
• To supervise if the schemes are operated as it was approved or not.
• To supervise if the record maintained by the Fund Manager is updated or not.
• To supervise if the grievance received regarding scheme have been resolved or not.
• To submit report regarding fund management from time to time.
• To perform other duties as prescribed by the Board.

Function and Duties of Fund Manager:

• To prepare scheme and to operate the scheme by receiving consent of the Fund Supervisor and approval of the Board.
• To manage and invest the asset of Scheme in efficient manner.
• To provide the news, information, details and documents regarding scheme to the Fund Supervisor in regular interval.
• To provide the news, information and details regarding scheme to the Fund Supervisor at regular interval.
• To resolve the grievance of the Unit holders and inform the Fund Supervisor regarding grievance.
• To instruct depository for receiving or distributing the securities, amount, interest, dividend or income of the Scheme.
• To perform other duties as prescribed by the Board.

Function and Duties of Depository:

• To maintain the record of the units and perform the transfer deed,
• To perform safe keeping of securities under scheme.
• To receive the securities, amount, interest, dividend or other income under the Scheme and so perform safe keeping of same,
• To distribute the securities, amount, bonus to the Unit holders as per the instruction of the Fund Manager, and
• To perform other functions as prescribed by the Board.