Learn / Market Basics
Market Basics
NAV, AUM, expense ratio, exit load, direct vs regular plans, NFOs, switches.
Net Asset Value (NAV) — how it's computed daily
NAV is the per-unit price of a mutual fund. AMCs compute it daily by valuing the portfolio at closing prices, subtracting fund expenses, and dividing by units outstanding. Investor transactions get the next available NAV after the cutoff time.
Assets Under Management (AUM) — what size means for performance
AUM is the total rupee value of all assets a fund manages — across all its investors. Size matters most in small- and mid-cap funds, where deploying ever-larger flows into a constrained universe creates real performance drag.
Expense Ratio (TER) — SEBI caps and what you pay
The Total Expense Ratio is the annual cost of running a mutual fund, charged as a percentage of AUM. SEBI caps it on a sliding scale: equity funds can charge up to ~2.25% at small AUM, falling to ~1.05% at very large AUM. Direct plans have meaningfully lower TER than Regular.
Exit load — when and how AMCs charge it
Exit load is a fee charged when you redeem mutual fund units before a specified holding period. It varies by category — most equity funds charge 1% if you exit within 12 months; liquid funds have a tiny graded load in the first week.
Direct vs Regular plan — the 1% drag
Every open-ended mutual fund offers both Direct and Regular plans. Direct skips the distributor / broker commission, saving 0.5-1.0% per year on expense ratio. Over decades the differential compounds to ~25% terminal wealth.
NFO — what to know before investing
A New Fund Offer is a fresh scheme launching, with units sold at a face value of ₹10. The marketing implies you're getting in "cheap" — but NAV in isolation tells you nothing. Most NFOs are worth skipping until they accumulate a 2-3 year track record.
Folio number, scheme code, ISIN — what each identifies
Folio number identifies your investor account at an AMC. Scheme code identifies a mutual fund scheme. ISIN identifies a specific plan + option of that scheme. Each appears on every CAS and statement; knowing what each represents avoids confusion.
CAS — Consolidated Account Statement, read end-to-end
CAMS and KFintech aggregate transactions from all AMCs into a single Consolidated Account Statement, sent monthly by email or downloadable on demand. Reading it well — and reconciling it against your AMC statements — is core portfolio hygiene.
Switching between funds — mechanics, tax, and timing
A switch moves money between schemes of the same AMC in a single operation. Compared to redeem-and-rebuy across AMCs, switching avoids T+1 bank float and one round of paperwork — but the capital gains and stamp duty rules apply exactly the same way.
STT (Securities Transaction Tax) on mutual funds
STT is levied on the redemption of equity-oriented mutual fund units. The current rate is 0.001%, applied to the gross redemption proceeds. Debt funds are exempt. It's small but it explains why some statements show a "STT" deduction.