Mutual funds are a category of investment that collect a pool of money from multiple investors and manage it professionally. You can invest in equities, bonds, money market instruments, specific themes or sectors through mutual funds. Due to economies of scale, the cost of investing is much lower and risk is diversified among a variety of stocks/sectors.
Mutual funds’ performance is measured through NAV (Net Asset Value) declared every day. Investors are allotted units at the purchase day’s NAV and sold at the unit's NAV prevailing on the day of sale.
The NAV is calculated as market value of the fund minus all expenses/liabilities plus fund’s accrued profits divided by total number of units of the fund.