A Mutual Fund brings together many investors, who pool their resources to invest collectively for mutual benefit. The money is managed by a fund manager, who is supported by a team of analysts and experts to help him invest the money. A fund could have many objectives, such as capital growth, steady income, capital protection, tax saving, etc. Depending on its objectives, the fund manager will allocate money to different financial instruments, such as equity and debt.
Each investor is allotted units proportionally based on their contribution to the fund. Thus, a unit is the fundamental block of a Mutual Fund.
The number of units the investor purchases is determined by the amount of money the investor is willing to invest. It is for the same reason that the investor is also known as a Unit Holder. The net return on the investment is calculated after deducting tax and research and administrative expenses. The value of each unit is expressed as Net Asset Value or NAV.