Investor Education
This section explains mutual funds in clear, simple terms—what they are, how they function, and the key factors to consider before investing. The information is purely educational and not investment advice.
A mutual fund brings together money from multiple investors and is professionally managed by a fund manager. This pooled money is invested across a diversified set of securities such as equities, bonds, money market instruments, or a combination of these.
Instead of selecting and monitoring individual investments yourself, the fund manager does this on your behalf based on the fund’s stated objective. As an investor, you hold units of the mutual fund rather than directly owning each underlying security.
NAV (Net Asset Value) represents the price of one unit of a mutual fund. It is calculated as:
NAV = (Market Value of All Investments – Expenses & Liabilities) ÷ Number of Units Outstanding
Your returns come from:
For long-term goals, the emphasis is usually on the growth of NAV over time rather than short-term fluctuations.
Note: Tax treatment varies by fund type and holding period. For example, equity funds held for more than one year are eligible for long-term capital gains tax benefits.
Mutual funds are broadly classified based on their investment objective and asset allocation.
Primarily invest in company shares. Ideal for long-term goals (5+ years) seeking higher growth potential, though with higher volatility.
Invest in bonds, government securities, and money-market instruments. Designed for stability, regular income, and lower risk compared to equity funds.
Blend of equity and debt to balance growth with stability. Suitable for investors with moderate risk tolerance.
Each category includes multiple SEBI-defined sub-categories such as large-cap, mid-cap, liquid, and short-duration funds. Selection should depend on your goals, time horizon, and risk profile.Learn how to choose the right fund
Being aware of these common mistakes can help you make better, more disciplined investment decisions.
Strong past performance doesn’t ensure future success. Evaluate consistency, the fund manager’s experience, and how well the fund fits your financial objectives.
Market ups and downs are expected. Halting SIPs during corrections can cause you to miss the advantage of accumulating units at lower prices.
Excessive diversification can reduce potential gains and make portfolio management harder. Generally, 4–6 carefully selected funds are enough.
Minor variations in expense ratios can add up over time and affect returns. Always compare costs among funds in the same category.
No, the NAV by itself doesn’t tell you whether a fund is good or inexpensive. A lower NAV does not imply better value. What really matters are factors like the fund’s performance history, consistency, expense ratio, and how well it fits your financial goals. A fund with a ₹10 NAV and one with a ₹100 NAV can both perform well or poorly depending on their portfolio and management quality.
Explore our comprehensive guides on choosing the right mutual funds, understanding STP, IDCW, and more to make informed investment decisions.
Mutual Fund Guide
Discover a step-by-step approach to picking the right mutual fund. This beginner-friendly guide explains goal setting, risk evaluation, fund analysis, performance checks, and why a structured process builds investing confidence.
Mutual Fund Guide
Learn how to select mutual funds based on goals such as retirement planning, education funding, or long-term wealth creation. Includes insights on risk profiling, fund manager assessment, expense ratios, and SIP suitability.
Mutual Fund Guide
An in-depth explanation of STP in mutual funds—how it works, key benefits, different STP options, and situations where STP may be a better choice than lump sum or SIP investing.
Mutual Fund Guide
An easy-to-understand guide on using Systematic Transfer Plans to gradually move lump sum money into equity funds. Includes relatable examples like bonuses, fixed deposit maturity, and property sale proceeds.
Mutual Fund Guide
A complete guide to IDCW (Income Distribution cum Capital Withdrawal) in mutual funds, covering its meaning, benefits, tax impact, comparison with SWP and growth options, and when IDCW may suit investors seeking periodic income.