1. A mutual fund pools investor money
Investors buy units in a scheme. The scheme then holds securities according to its investment objective.
Tip: You own units of the scheme, not individual securities directly.
2. The mandate decides what the fund can own
An equity fund, debt fund, hybrid fund and index fund can have very different risk even though all are mutual funds.
Note: Mutual fund is a wrapper, not one asset class.
3. NAV reflects the per-unit value
The value of scheme assets minus liabilities is divided by outstanding units to calculate NAV. A low NAV is not automatically cheaper.
Tip: Price per unit alone does not tell you expected return.
4. Costs and taxes reduce what you keep
Expense ratio, exit load in applicable cases and taxes can affect investor return. Compare the fund’s objective, risk and cost, not just past performance.
Tip: Past returns do not guarantee future returns.
5. Quick check
A mutual fund with NAV ₹20 is automatically cheaper than one with NAV ₹200. True?
Answer: B - NAV is a per-unit accounting value, not a valuation measure like a stock price.