Skip to main content
FundSageAI IconFundSageAI
Level 3 • FundSage Academy

Mutual Funds

•Updated for FY 2025-26•By FundSageAI Quantitative Research Team

How mutual funds work, the terms you'll see on every fund page, and the fund categories available in India.

What You Will Learn in This Level

Level 3 provides actionable mutual fund frameworks calibrated for Indian retail investors. Mastering these lessons protects your portfolio from common psychological traps, hidden expense drag, and improper asset allocation.

✓What is a Mutual Fund?: A mutual fund is a shared basket — you own a slice of everything in it, not one stock.
✓What is NAV?: NAV is a unit price, not a scorecard — judge a fund by its % return, never by its NAV number.
✓What is AUM?: AUM measures how big a fund is, not how good it is — size and performance are separate questions.
✓Expense Ratio Explained: Expense ratio is a silent annual fee taken from your NAV — lower isn't everything, but it compounds over decades.

Key Terms & Definitions in Level 3

Unit

The smallest ownership slice of a mutual fund, similar to a share of a company.

AMC

Asset Management Company — the SEBI-registered firm that runs the mutual fund.

NAV

Net Asset Value — the price of one unit of a mutual fund, published once per business day.

AUM

Assets Under Management — the total market value of everything a mutual fund holds, across all its investors.

TER

Total Expense Ratio — the annual fee an AMC charges for managing a fund, deducted daily from NAV.

Exit load

A fee charged on redemption if units are sold before a fund's minimum holding period.

Rupee-cost averaging

The effect of a fixed periodic investment buying more units when NAV is low and fewer when NAV is high, averaging out the purchase price.

STP

Systematic Transfer Plan — an automated, recurring transfer of a fixed amount from one mutual fund to another within the same AMC.

Lessons in Level 3

1

What is a Mutual Fund?

Beginner · 4 min read

2

What is NAV?

Beginner · 3 min read

3

What is AUM?

Beginner · 3 min read

4

Expense Ratio Explained

Beginner · 4 min read

5

Exit Load Explained

Beginner · 3 min read

6

What is a SIP?

Beginner · 4 min read

7

What is an STP?

Intermediate · 4 min read

8

What is an SWP?

Intermediate · 4 min read

9

Direct vs Regular Plans

Intermediate · 5 min read

10

Growth vs IDCW

Intermediate · 4 min read

11

Equity Funds Explained

Intermediate · 5 min read

12

Debt Funds Explained

Intermediate · 5 min read

13

Hybrid Funds Explained

Intermediate · 5 min read

14

What is ELSS?

Intermediate · 4 min read

15

Flexi Cap Funds

Intermediate · 4 min read

16

Small Cap vs Multi Cap Funds

Intermediate · 5 min read

17

Sector & Thematic Funds

Advanced · 5 min read

Frequently Asked Questions: Mutual Funds

Is a mutual fund the same as a stock?

+
No. A stock is ownership in one company. A mutual fund pools money from many investors and spreads it across many companies (or bonds), so it behaves differently from any single stock — usually with lower risk because losses in one holding can be offset by gains in another.

Can I lose money in a mutual fund?

+
Yes. Mutual funds are market-linked, and equity funds in particular can fall in value during market downturns. They are not fixed-return products like a bank fixed deposit. The amount you can lose depends on the fund's category — debt funds are typically far less volatile than equity funds.

Who manages a mutual fund?

+
A SEBI-registered Asset Management Company (AMC) runs the fund, and a named fund manager (or team) makes the day-to-day decisions on what securities to buy, hold, or sell within the fund's stated investment mandate.

How much money do I need to start?

+
Most mutual funds in India let you start a SIP (Systematic Investment Plan) with as little as ₹500 per month, or make a lump-sum investment starting around ₹1,000, making mutual funds accessible even to first-time investors with limited capital.

Does a lower NAV mean the fund is cheaper to buy?

+
In terms of return potential, no — NAV is simply the current price of one unit, similar to how a ₹20 stock isn't inherently "cheaper" than a ₹2,000 stock in value terms. What matters is the fund's percentage growth over time, not the absolute NAV figure.