Investor Education

Mutual Fund Basics

This page explains mutual funds in simple language—what they are, how they work, and what you should keep in mind before investing. It is meant for education only and not as a recommendation to buy or sell any specific scheme.

What is a mutual fund?

A mutual fund is a pool of money collected from many investors and managed by a professional fund manager. The fund invests this pool into a basket of securities such as shares, bonds, money-market instruments or a combination of these.

Instead of you directly buying individual shares or bonds and tracking them, the fund manager does this on your behalf as per the fund's stated objective. You own units of the mutual fund, not the underlying shares directly.

What is NAV and how do I earn returns?

NAV (Net Asset Value) is the price of one unit of a mutual fund. It is calculated as:

NAV = (Market value of all investments – expenses & liabilities) ÷ Number of units outstanding

When the value of the fund's investments goes up or down, the NAV also changes. Your return comes from:

  • • Increase in NAV (capital appreciation).
  • • Dividends / payouts in certain types of plans, if opted.

For long-term goals, the focus is usually on growth of NAV over time, not day-to-day fluctuations.

Main categories of mutual funds

There are many sub-categories, but at a high level:

Equity Funds

Invest mainly in shares of companies. Suitable for long-term goals (5+ years). Higher return potential with higher volatility.

Debt / Fixed Income Funds

Invest in bonds, government securities and money-market instruments. Aim for more stability and income than equity funds.

Hybrid / Balanced Funds

Invest in a mix of equity and debt. Try to balance growth with stability. Useful for moderate-risk investors and near-goal transitions.

Within each bucket there are many SEBI-defined sub-categories (large cap, flexi cap, mid cap, liquid, short duration, etc.). Suitability depends on your goal, time horizon and risk profile.

Direct vs Regular plans – where do we fit in?

Every mutual fund scheme is available in two broad options:

Direct Plan

  • • You invest directly with the AMC without a distributor.
  • • Expense ratio is usually lower.
  • • You are responsible for scheme selection, monitoring and rebalancing on your own.

Regular Plan (Distributor-assisted)

  • • You invest via a mutual fund distributor like HRP Wealth.
  • • AMC pays a commission/trail to the distributor out of the fund's expenses.
  • • You receive guidance, behavioural support and periodic reviews to keep your plan on track.

HRP Wealth currently works in the role of an AMFI registered mutual fund distributor and IRDA authorized insurance consultant. Our focus is to simplify choices, align products with your goals and provide ongoing support, especially around behaviour and reviews.

When should you talk to us?

  • • You are starting SIPs for the first time and want a clear goal map.
  • • You have existing policies and funds but are unsure if they are on the right track.
  • • You are within 5–15 years of retirement and want to plan SWP-based income.
  • • You are an NRI and want to clarify how to invest in India.
Contact usView mutual fund solutions

Important Disclosures & Risk Information

  • • HRP Wealth currently acts as an AMFI registered mutual fund distributor (ARN-342284) and IRDA authorized insurance consultant. We do not act as a SEBI registered investment adviser (RIA) as of now.
  • • We may receive commissions and incentives from AMCs / insurers for the products you choose. We do not charge any additional advisory fee unless explicitly agreed in writing.
  • • All information, illustrations, and calculator outputs on this website are for education and awareness only. They are not a recommendation to buy, sell, or switch any specific scheme.
  • • Mutual fund investments are subject to market risks, including possible loss of principal. Read all scheme related documents carefully before investing. Past performance does not guarantee future returns.
  • • Final product selection, asset allocation, and investment decisions should be taken only after a one-to-one discussion where we understand your income, expenses, risk profile, time horizon, and existing portfolio.
  • • We do not provide intraday trading tips, guaranteed returns, or unofficial shortcuts. We never ask for your internet banking / OTP / login credentials.