What is a mutual fund?
A mutual fund pools money from thousands of investors and a SEBI-licensed fund manager invests it as per a stated mandate (large-cap equity, short-duration debt, hybrid, and so on). You own units, not the underlying stocks. The unit price is the NAV, calculated end of day. AMCs are the companies that run the funds (HDFC AMC, Nippon, ICICI Prudential). They charge an annual expense ratio.
An equity mutual fund with a 1.0% expense ratio on a ₹10 lakh portfolio costs you ₹10,000 a year. The same portfolio in a 0.2% index fund costs ₹2,000. Over 25 years that 0.8% gap compounds to roughly ₹15 lakh of foregone returns on a ₹10 lakh starting corpus.
Picking last year's top-performing fund. Performance reverts; expense ratios persist. A boring index fund with low costs beats most active funds over 10+ year windows in India too.
A 60-second lesson on this, with a worked drill, lives inside the Finlo app. Free, forever, on the basics.