• Mutual funds refers to the money pooled by a number of people with an investment objective. Since it is a fund, it has to be managed. The person who manages the mutual funds is called the 'Fund Manager'.
• Mutual funds invest money in equities, debt securities with the aim of earning high returns. Every investor holds units of the fund which represents a part of their holding. The income gained is distributed proportionately to investors by calculating the scheme's NAV.
• Mutual funds are the most viable and the feasible option for investments to a common man as it provides opportunity to invest in a diversified portfolio of securities with a lesser cost.

The mutual fund industry began in 1963 with the creation of Unit Trust of India as an initiative by the Government of India and the Reserve Bank of India. In 1987, SBI Mutual Fund was established. The year 1993 marked a new era in the mutual fund industry. This marked the entry of private sector companies in this sector. Since then the industry has continued to grow many folds.

• Managed by professional fund managers who make subtle investments according to market changes and trends.
• Pools savings by investing in diversified stocks according to risks, objectives and returns.
• Investors can invest a small amount of money in mutual funds and can yield high returns on the investment. SIP is a great tool that can help earn higher returns with a lower threshold of funds.
• Mutual funds have high levels of convenience. It allows swapping of funds from one fund to another.

• NAV- Net Asset Value is the per unit market value. It is the price at which a fund can be bought or a sold. The NAV is the total value of the assets less liabilities divided by the number of units outstanding.
• Units- A unit is a share in the mutual fund. The units represent the total share held by the investor in a particular fund.
• SIP- Systematic Investment Plan or SIP refers to investment in a systematic planned way. In SIP Scheme, one can invest a fixed amount at regular intervals. It helps average purchase costs.
• STP- Systematic Transfer Plan is similar to SIP. In STP, one can transfer a fixed amount from one mutual fund to another, provided both funds have to be of the same fund house.
• SWP- Systematic Withdrawal Plan allows investor to withdraw funds from the scheme on a fixed date every month.
• Benchmark Index- A benchmark is a standard for comparison. Mutual funds have an index which can be used to measure the performance. Such index is called the Benchmark Index. A large cap fund may have Sensex or Nifty as the f. benchmark while small and midcap funds may have the Midcap Index as their benchmark.
• Asset Allocation- It is allocating the mutual fund’s portfolio across various asset types like equity, money market instruments, and bonds. It can change according to the market trends
• Growth Option- Under the growth option, the fund doesn’t pay dividend but instead invests the same in the fund. This helps to get better compounding returns in the long term.
• Dividend Option- Under this, the investors receive dividend declared by the mutual funds. The amount of dividend is calculated on face value of the fund. The NAV decreases once the dividend has been paid.
• Dividend Reinvestment Option- Under this, the dividends received by the investors would be invested back in the funds and thereby increases the number of units held by the investors.