A Mutual fund is an investment vehicle made up of a pool of funds collected from numerous investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. Mutual funds are an alternative investment instrument for small saving holders in stock market. Mutual Funds have a significant role to play in financial development of a developing economy like, India. Mutual funds have emerged as one of the best investment options in terms of variety, flexibility, diversification, and liquidity as well as tax benefits. Mutual funds as an option have displayed tremendous growth potential when the markets are optimistic and when wise choices are made. They have performed much better than traditional investment options in the long term and thus help investor beat inflation to some extent.The tremendous success the fund industry enjoyed is due to due the fact that it has done more than any other financial services industry to offer investors solid products tailored to meet real financial needs, and marketed those products responsibly. But it cannot be ignored that rapid changes and market pressures are challenging.