Investor education: mutual fund basics

NAV (Net Asset Value)

NAV is the value of one unit of a scheme. It is worked out by taking the market value of everything the scheme holds, subtracting its liabilities and expenses, and dividing by the number of units in issue. It is declared for every business day.

When you invest, you buy units at the applicable NAV, and when you redeem, you sell them at the applicable NAV. Which day's NAV applies depends on when your request and your money reach the fund, under cut-off timing rules set by the regulator. A lower NAV does not make a scheme cheaper or a higher NAV more expensive. What matters is how the value of the scheme's holdings changes after you invest.

Expense ratio

The expense ratio is the annual cost of running a scheme, expressed as a percentage of its assets. It covers fund management, administration, and in a regular plan the commission paid to the distributor. Under the SEBI (Mutual Funds) Regulations, 2026, in force from 1 April 2026, the Total Expense Ratio (TER) is the total of the base expense ratio, brokerage, transaction costs and statutory levies. The regulations set limits.

You do not pay it as a separate bill. It is deducted from the scheme's assets a little every day, so the NAV you see is already net of expenses. Each scheme's current expense ratio is published on the asset management company's website.

Exit load

An exit load is a charge that some schemes apply if you redeem or switch out within a stated period after investing. It is deducted from the redemption amount. Whether a scheme has an exit load, how much it is and for how long it applies are stated in the scheme documents and can differ from one scheme to another. Check it before investing money you may need soon.

Riskometer

Every scheme carries a riskometer, a dial that shows the level of risk in the scheme on a six-level scale: Low, Low to Moderate, Moderate, Moderately High, High and Very High. It appears in the scheme documents, in advertisements and on account statements.

• The level is based on what the scheme currently holds, and it is reviewed regularly, so it can change.
• It describes the risk to your principal. It says nothing about expected returns.
• Even the lowest level is not an assurance against loss.

Use it to check that a scheme's risk matches the time you have and the fall you could live with. More on this in our article on the riskometer and scheme documents.

KYC (Know Your Client)

KYC is a one-time identity and address verification that is mandatory under SEBI regulations before you can invest in any mutual fund. It is largely paperless and typically requires your PAN, Aadhaar and a photograph. Once your KYC is in place it is recognised across mutual funds, and you should keep it up to date when your details change.

We assist investors with the KYC process. Deal only with registered intermediaries, and do not share one-time passwords with anyone.

Scheme documents: SID, SAI and KIM

The risk line asks you to read all scheme related documents. These are the three it refers to.

All three are published on the asset management company's website. If something in them is unclear, ask before you invest.

Growth and IDCW options

Most schemes let you choose what happens to the gains the scheme makes.

• Growth option: nothing is paid out. Gains stay in the scheme and are reflected in the NAV. You receive money only when you redeem units.
• IDCW option (Income Distribution cum Capital Withdrawal): the scheme may pay out amounts from time to time. The NAV falls by the amount paid out, and part of a payout can be your own capital coming back to you. Payouts are not guaranteed in amount or frequency.

The two options are taxed differently, which is one more reason to check the current rules.

Regular and direct plans

The same scheme is usually offered as a regular plan and a direct plan. Both hold the same portfolio. A regular plan is bought through a distributor and its expense ratio includes the distributor's commission. A direct plan is bought from the asset management company without a distributor, so its expense ratio is lower and its NAV differs.

I Tag Financials distributes regular plans and earns commission from asset management companies. You are free to invest in direct plans on your own. Read our regular vs direct plan disclosure and commission disclosure.

Taxation

Gains and payouts from mutual funds are taxable. How they are taxed depends on the type of scheme, how long you held the units and your own tax position. Tax rules change, sometimes every year, so we do not quote rates or holding periods here. Check the current rules, or ask a tax professional, before you invest or redeem. We do not provide tax advice.

How to check a distributor's ARN

Every mutual fund distributor must hold a valid AMFI Registration Number (ARN). You can check it yourself in a few minutes.

1. Ask the distributor for their ARN. Ours is ARN-319081.
2. Go to the AMFI website (amfiindia.com) and find its distributor search facility.
3. Search by ARN or by name.
4. Confirm that the registered name matches who you are dealing with and that the ARN is within its validity period. Our registered entity is Green Outdoors Global Private Limited and our ARN is valid January 2025 – January 2028.

An ARN shows that a person or firm is registered to distribute mutual funds. It is not a registration as a SEBI-registered Investment Adviser, and it is not an endorsement of any scheme.

How to complain

1. Write to us first at itagfin@gogpl.in or call +91 75750 24455.
2. If the matter is not resolved, approach the concerned asset management company or AMFI.
3. You may also lodge a complaint with SEBI through the SCORES portal (scores.sebi.gov.in) or use the SMART ODR portal (smartodr.in) for online dispute resolution.

The full process is on our grievance redressal page, and your entitlements as an investor are on the investor rights page.

Official investor-education resources

For material published by the industry body and the regulator, go to the source.

• AMFI: amfiindia.com. Investor education material, NAV data and the distributor search.
• SEBI: sebi.gov.in. The securities market regulator, with investor awareness material and the regulations that govern mutual funds.