Glossary
Mutual fund
A pooled portfolio of securities professionally managed on behalf of many investors.
Definition
A mutual fund is a pooled investment vehicle that collects money from many investors and uses it to buy a portfolio of equity, debt, or hybrid securities. Each investor owns units priced at the fund’s daily Net Asset Value (NAV). In India, mutual funds are regulated by SEBI and distributed by AMCs (asset management companies).
Key points
- NAV = (total assets − liabilities) ÷ units outstanding, updated daily after market close.
- Equity funds invest mostly in stocks; debt funds in bonds; hybrid funds blend both.
- Mutual funds charge a Total Expense Ratio (TER) — typically 0.5–2 % annually.
- SIPs are the most common way Indian retail investors buy mutual-fund units.
Worked example
An investor doing a ₹5,000 monthly SIP into an equity mutual fund buys a different number of units each month — more when NAV is low, fewer when NAV is high. Over 10 years they accumulate units at a rupee-cost-averaged price; the final corpus depends on the NAV at exit.
Related
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