When you invest in a mutual fund, you are essentially buying shares or units of the fund. The value of these shares, known as Net Asset Value (NAV), fluctuates based on the performance of the underlying investments in the fund. The NAV is calculated by dividing the total value of the fund’s assets by the number of shares outstanding.
There are various types of mutual funds catering to different risk levels, investment objectives, and asset classes. Some common types include equity funds (investing in stocks), bond funds (investing in bonds), money market funds (investing in short-term debt securities), and balanced funds (a mix of stocks and bonds).