Mutual fund

A pooled investment run by an asset management company, in which investors buy units at the fund's net asset value and own a proportional share of its holdings. In India it is set up as a trust and regulated by SEBI, which sorts schemes into fixed categories, such as large cap, flexi cap, liquid and gilt, so that funds with the same label hold broadly similar assets.

Put ₹50,000 into a fund at a net asset value of ₹25 and you get 2,000 units. If the value rises to ₹27.50 your holding is worth ₹55,000, a 10% gain, and the fund's costs have already come out of that value.

How good a fund is for a given investor depends on what it holds and what it costs each year, and on how its return compares with an index fund tracking the same category. That last comparison is the one most often skipped.

Compare with the index before the peer group.