Learn Mutual Funds
Plain-English basics and a glossary of every metric we use.
What is a mutual fund?
A mutual fund pools money from many investors and a professional manager invests it in stocks, bonds or both. You own units; their price is the NAV, published daily.
SIP vs Lump Sum
A SIP invests a fixed amount every month, averaging your buy price across market ups and downs. A lump sum invests it all at once — better when markets are low, riskier when high.
Direct vs Regular plans
Direct plans skip distributor commissions, so their expense ratio is lower and NAV grows faster. MF Scanner focuses on Direct plans. Same fund, lower cost.
Growth vs IDCW
Growth reinvests gains so your NAV compounds. IDCW (dividend) pays some out, resetting the NAV — which distorts return comparisons, so we analyse Growth options.
ELSS & tax saving
ELSS funds invest in equity with a 3-year lock-in and qualify for up to ₹1.5 L deduction under Section 80C — the only mutual funds with a direct tax benefit.
Expense ratio
The annual % a fund charges to manage your money. Lower is better — over decades even 1% compounds into a large difference in your final corpus.
Glossary
- NAV
- Net Asset Value — the per-unit price of the fund, published once daily.
- CAGR
- Compound Annual Growth Rate — the smoothed annual return over a multi-year period.
- XIRR
- The annualised return of a series of investments made at different times (used for SIPs).
- Sharpe ratio
- Return earned above the risk-free rate per unit of total risk. Higher is better.
- Sortino ratio
- Like Sharpe, but only counts downside volatility as risk.
- Max drawdown
- The worst peak-to-trough fall the fund has ever had.
- Standard deviation
- How much returns swing around their average — a measure of volatility.
- AUM
- Assets Under Management — the total money the fund manages.
- Exit load
- A fee charged if you redeem before a minimum period.
- Rolling returns
- Returns measured over every possible window of a given length — a fairer view of consistency than a single period.
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