The performance of a particular scheme of a mutual fund is denoted by Net Asset Value (NAV). In simple words, NAV is the market value of the securities held by the scheme.
Mutual funds invest the money collected from investors in securities markets. Since market value of securities changes every day, NAV of a scheme also varies on day to day basis.

The NAV per unit is the market value of securities of a scheme divided by the total number of units of the scheme on any particular date.

For example, if the market value of securities of a mutual fund scheme is INR 200 lakh and the mutual fund has issued 10 lakh units of INR 10 each to the investors, then the NAV per unit of the fund is INR 20 (i.e.200 lakh/10 lakh). NAV is required to be disclosed by the mutual funds on a daily basis. The NAV per unit of all mutual fund schemes have to be updated on AMFIís website and the Mutual Funds’ website by 9 p.m. of the same day. Fund of Funds are allowed time till 10 a.m. the following business day to update the information.

Unlike stocks (where the price is driven by the market and changes from minute-to-minute) , mutual funds don't declare NAVs through the day.

Instead, NAVs of all mutual fund schemes are declared at the end of the trading day after markets are closed, in accordance with SEBI Mutual Fund Regulations. Further, as per SEBI Mutual Fund Regulations, for all mutual fund schemes, other than liquid fund schemes, the mutual fund Units are allotted only at prospective NAV, i.e., the NAV that would be declared at the end of the day, based on the closing market value of the securities held in the respective schemes.

Thus, what is important here is the cut-off time for submission/receipt of the transaction – If you invest before the cut-off time, you will get the end-of-day NAV of that particular business day. The cut off time for purchase transactions for all mutual fund schemes other than liquid fund schemes is 3:00 p.m. This means that if you have invested till 3:00 p.m. on a particular day, you will get that day's NAV.

A mutual fund may accept applications even after the cut-off time, but you will get the NAV of the next business day. Further, the cut-off time rules apply for redemptions too.

Expense ratio represents the annual fund operating expenses of a scheme, expressed as a percentage of the fund’s daily net assets. Operating expenses of a scheme are administration, management, advertising related expenses, etc.

An expense ratio of 1% per annum means that each year 1% of the fund’s total assets will be used to cover expenses. Information on expense ratio that may be applicable to a scheme is mentioned in the offer document. Currently, in India, the expense ratio is fungible, i.e., there is no limit on any particular type of allowed expense as long as the total expense ratio is within the prescribed limit. For limits on expense ratio, refer to regulation 52 of the SEBI (Mutual Funds) Regulations, 1996.

One may invest in mutual funds with the help of a financial intermediary i.e., a Mutual Fund distributor/agent in a Regular Plan OR choose to INVEST DIRECTLY i.e., without involving or routing the investment through any distributor/agent in a ‘Direct Plan’.

'Direct Plan' and 'Regular Plan’ are both part of the same mutual fund scheme, have the same / common portfolio and are managed by the same fund manager, but have different expense ratios (recurring expenses that is incurred by the mutual fund scheme). Direct Plan has lower expense ratio than the Regular Plan, as there is no distributor/agent involved, and hence there is saving in terms of distribution cost/commissions paid out to the distributor/agent, which is added back to the returns of the scheme. Hence, a Direct Plan has a separate NAV, which is higher than the normal “Regular” Plan’s NAV.

In case of winding up of a scheme, the mutual funds refund to the unitholders whose names appear in the Unit Holders’ Register value of their outstanding Units at prevailing NAV, after adjustment of all expenses. Unitholders are entitled to receive a report on winding up from the mutual fund which gives all necessary details.

Total return index (TRI) is an index that measures the performance of a group of components (say, equities or debt instruments) by assuming that all cash distributions are reinvested, in addition to tracking the components’ price movements. In other words, it measures performance, reflecting the actual rate of return of an investment or a pool of investments over a given period. And it includes interest, capital gains, dividends and distributions realised over a given period of time from such pool of investments. Globally, TRI is viewed as a strong measure to reflect the actual out-performance over benchmark returns by a mutual fund scheme.