What is Mutual Fund?

Mutual Fund is a trust who collects money from all investors and invests in schemes intimated by investors. Mutual funds declare NAV (Net Asset Value).

What is NAV?

NAV is Net Asset Value.

I will explain to you with an example If MF House name "A" brings a new scheme to the market. If "A" collected 100000/- then it allocated 10000/- units to investors. Face value 10/- per unit so 100000/10= 10000 Unit. If After one week 100000/- became 120000/- then NAV became 120000/10000 unit= 12/-

So in simple terms NAV is average market price and the purpose of NAV is to calculate profit, Loss and to allot a unit.

Old funds have higher NAV and new funds have lower but it does not mean lower NAV is better because you are getting units at lower price.


Certain small % is deducted from the scheme every year as defined in regulation. NAV declared after deducting such expenses.


Where do mutual funds invest?

Mutual funds invest in various financial instruments like Equity shares, Government Securities, Bonds,Gold, Arbitrage etc...


You can categorize mutual funds in different ways. Giving you information about certain important category


1) Type of financial instruments

  • Equity Fund: More than 65% invested in equity shares.

  • Debt Fund: More than 65% invested in Debt

  • Hybrid Fund: In Hybrid investment made in various combinations of Equity, debt, Commodity, Global Fund. It defines in scheme prospect

  • Global Fund: Scheme invest in Global Stock Market

  • Commodity Fund: Scheme invest in Gold, Silver etc...


2)Lock in and without Lockin

  • Open ended

  • Close ended


Note: Tax saving funds or such Fund in which if you invest you get tax benefit are open ended funds but that were locked for 3 years as per income tax regulation. After 3 years it automatically unlock


3)According to Risk level.

  • Liquid Fund - Low Risk

  • Ultra Short term

  • Low duration

  • GILT Fund

  • Gold Fund

  • Arbitrage Fund

  • Hybrid Fund

  • Equity Fund

  • Thematic Fund - High Risk