A mutual fund (MF) is a professionally managed type of collective investment scheme that pools money from many investors i.e. your money and invests it in stocks, bonds, short-term money market instruments, and/or other securities to yield returns. If you are apprehensive of investing in the stock market because of its unpredictability, play relatively safe with MFs.

You will receive units of the MFs in proportion to the money put in. The value of each unit is also impacted when management fees and other expenses are deducted from the overall pool of funds.

The value of a unit is called the Net Asset Value (NAV) of the MF which changes on a daily basis.

Investors who wish to purchase or sell units of a mutual fund after the scheme is fully functional must do so at a price that is linked to the NAV or the Net Asset Value.