There are two ways in which you can make money through a mutual fund investment.
First, you can earn a dividend from the mutual fund scheme. Most debt funds declare dividends around once in six months in their Dividend Option. If you do not want the dividend, you can choose to be in the Cumulative Option. When a dividend is declared, the NAV of the units will fall, since dividend is paid out of the appreciation in the value of the unit.
Second, you can make a return by selling the mutual fund units at a price higher than that at which you bought them. This is called capital gain. On the other hand, if you sell the units at a price lower than your purchase price, you end up making a capital loss.
Please note that taxation of dividends and capital gains are treated differently.
