What is a ‘Mutual Fund’

A mutual fund is an investment vehicle made up of a pool of moneys collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and other assets. Mutual funds are operated by professional money managers, who allocate the fund’s investments and attempt to produce capital gains and/or income for the fund’s investors. A mutual fund’s portfolio is structured and maintained to match the investment objectives stated in its prospectus.


Net Asset Value (NAV) is the value of a mutual fund scheme’s assets minus the value of its liabilities per unit. It is the price at which you buy the unit of a scheme. It may also be the price at which you would sell the unit (minus any load if applicable). 
In simple words, NAV is the price which you pay to buy a unit of mutual fund scheme when you invest. You also sell it on NAV, but the sell price can be lower than NAV if there is an exit load. Exit load is always chargeable as a percentage of the NAV. 
For example, you are investing Rs 10,000 in a scheme with an NAV of Rs 200. You will receive 50 units (10,000/200). Now, if the NAV increases to Rs 250 in a year and you decide to sell it. You will receive Rs 12,500 (50 units X Rs 250). And if exit load is applicable at the rate of 1 per cent, you will get Rs 12,375 (50 units X Rs 247.50 NAV minus the exit load).