Mutual Funds

A mutual fund collects money from many investors and invests it in a portfolio — shares, bonds, money-market instruments, gold, or a mix — according to a mandate written into its scheme documents. In return you receive units. The value of each unit, the NAV, is worked out at the end of every business day from the market value of everything the fund holds, minus its expenses.

Each fund is run by an asset management company (AMC), overseen by trustees and regulated by SEBI. The fund's assets are held by an independent custodian, separate from the AMC's own money, and your units are recorded in your name with the fund's registrar.

• Diversification at small amounts. A single SIP instalment buys a sliver of dozens, sometimes hundreds, of securities.
• A choice of approach. Active funds try to beat a benchmark; index funds and ETFs aim to match one at lower cost.
• Liquidity. Open-ended funds can usually be redeemed on any business day. ELSS lock-ins and exit loads are the main exceptions.
• Transparency. Funds publish portfolios, expense ratios and riskometer levels regularly.
• Regulation. Categories, valuation, disclosure and costs are governed by SEBI rules.

SEBI groups schemes so that funds with similar mandates can be compared. Since February 2026 the broad groups are equity, debt, hybrid, life cycle funds, and "other" schemes such as index funds, ETFs and fund-of-funds.

Each category page explains what the funds hold, who typically explores them, the risks, the time horizon and how gains are taxed.

• SIP — a fixed amount at regular intervals, usually monthly.
• Lumpsum — a one-time investment.
• STP — a systematic transfer from one fund (often a liquid fund) into another over time.
• SWP — systematic withdrawals from a corpus, for regular cash flow.

A step-up SIP raises the instalment each year, often in line with income. The SIP Lab and SWP Calculator show how each one plays out under assumptions you set.

1. Mandate and category — what the fund may buy, and what it may not.
2. Riskometer — the risk level the fund house assigns, reviewed monthly.
3. Benchmark — the yardstick the fund is measured against.
4. Costs — the total expense ratio and any exit load.
5. Portfolio — what it actually holds today, and how concentrated it is.
6. Process — how the manager selects and sells, and how consistently.
7. Scheme documents — the Scheme Information Document and Key Information Memorandum.

Past returns are published for every fund. They describe what happened; past performance may or may not be sustained in future.

1. Understand. Read the category guides, the glossary and the Academy.
2. Plan. Size your goals in Goal Studio or take stock in the Wealth Lab.
3. Talk, if you'd like. A CompoundX relationship manager can walk you through the concepts — book a conversation.
4. Invest. When you choose to go ahead, Start investing takes you to our investment platform partner, where account opening, KYC and transactions are processed.
5. Track. Your goals, saved plans and the status of your investment journey stay in your CompoundX account.

Note: CompoundX's tools and content are educational. They don't recommend specific schemes, and the decision to invest — and in what — is yours.

Neither is better in every case. They answer different questions.

• A SIP suits money that arrives monthly, and removes the need to choose a moment. Buying a fixed rupee amount means you buy more units when prices are low and fewer when they are high — rupee-cost averaging.
• A lumpsum puts available money to work at once. Over long horizons, time in the market tends to matter more than the entry point, but a lumpsum is fully exposed to a fall soon after investing.
• An STP sits between the two: park the lumpsum in a liquid fund and transfer it into equity over months.

For illustration, assume a fund's NAV is ₹10, ₹8 and ₹12 over three months. ₹3,000 a month buys 300, 375 and 250 units — 925 units for ₹9,000, an average cost of about ₹9.73 against a simple average NAV of ₹10. Averaging smooths the entry price; it does not protect against losses if prices keep falling.

Compare both in the SIP Lab and the Lumpsum Calculator.

Total expense ratio (TER). The annual cost of running the fund, expressed as a percentage of its assets and deducted a little each day within the NAV — you never see a separate bill. Since 1 April 2026, SEBI's revised framework separates a base expense ratio from brokerage and statutory levies; the TER shows them together. SEBI caps what funds may charge. See expense ratio.

Exit load. A charge some funds deduct if you redeem within a set period — for example, within a year of investing in many equity funds. It is shown in the scheme documents and applies per purchase, so each SIP instalment has its own clock.

Other charges. A small stamp duty applies to purchases, and other statutory charges can apply on some transactions. Tax on gains is separate and depends on the fund type.

Small differences in cost compound. Over long horizons, a lower expense ratio can make a visible difference to the final value, all else being equal.

NAV is the value of one unit: the market value of the fund's holdings, plus cash, minus liabilities and expenses, divided by the number of units.

• A low NAV is not "cheap". A fund at ₹15 is not better value than one at ₹150. What matters is how the holdings perform from here, not the starting number.
• Cut-off times decide which NAV you get. Purchases and redemptions received before the daily cut-off (earlier for liquid and overnight funds) get that day's NAV; for purchases, the money must also reach the fund in time.
• IDCW payouts reduce NAV. When a fund pays out under the IDCW option, the NAV falls by the amount paid. The growth option keeps gains invested instead.

Every scheme carries a SEBI-mandated riskometer with six levels: Low, Low to Moderate, Moderate, Moderately High, High and Very High. Fund houses assess it monthly from the actual portfolio, publish it with their portfolio disclosures and notify investors when it changes.

Debt funds also show a Potential Risk Class matrix, which places the fund on two axes: interest-rate risk and credit risk.

The riskometer describes the fund, not you. Whether a risk level fits depends on your goal, your time horizon and what else you own.

Most schemes come in two plans with the same portfolio and fund manager:

• Direct plan — bought directly from the fund house, with no distributor commission, so a lower expense ratio.
• Regular plan — bought through a distributor, whose commission is paid by the fund house and included in the expense ratio, so the expense ratio is higher.

The plans have separate NAVs, and the gap between them widens over time because of the cost difference.

[To be confirmed by Compliance] Where CompoundX acts as a mutual-fund distributor, its registration, the plan type offered and how it is paid are disclosed on our Disclosures page.

How gains are taxed depends on what the fund holds and how long you hold it.

IDCW payouts are added to your income and taxed at your slab rate. Capital gains, LTCG and STCG are explained in the glossary.

The Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026. Rules change — check the latest provisions or speak to a tax professional. Last reviewed October 2026.

Scheme documents. The Scheme Information Document sets out the mandate, asset allocation, risks and costs; the Key Information Memorandum summarises it; the Statement of Additional Information covers the fund house. Monthly factsheets show the current portfolio.

KYC. Every mutual-fund investor completes KYC once, recorded with a KYC registration agency and usable across fund houses. With CompoundX, KYC is completed on our investment platform partner's secure flow — CompoundX does not ask you to upload identity documents or bank details on our website.