New Delhi, Sept. 24 -- A mutual fund statement can make investing look surprisingly neat. There is an amount invested, a number of units, an NAV and, eventually, a gain or loss. Behind those few numbers, however, quite a lot is happening.

The money does not simply sit with the fund waiting to earn a fixed rate of interest. A mutual fund pools money from investors and invests it in securities according to the scheme's stated objective. Depending on the scheme, the portfolio could contain shares, bonds, money-market instruments or a combination of assets. SEBI explains that mutual funds are professionally managed and that the value of each unit, or Net Asset Value (NAV), is disclosed daily.

Understanding that journey makes mutual fund ret...