What is Mutual Fund

A mutual fund is a SEBI-regulated investment vehicle that pools money from multiple investors to buy a diversified mix of stocks, bonds and other securities. Professional fund managers handle the portfolio, and you own units in proportion to your investment. Mutual funds let you start investing in 50+ stocks with as little as Rs. 100/month through SIP.
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What Is a Mutual Fund?
INVEST NOW
4 mins read
12-December-2025

A mutual fund is an investment instrument that pools money from numerous investors to invest in a diversified pool of securities such as equities, bonds, and other money market instruments. Mutual funds have become one of the most widely invested instruments as they make up for effective diversification, which spreads the risks across numerous securities and offers steady returns to investors. Among numerous investment instruments you can invest in, mutual funds ensure investment discipline through systematic investment over time. Since professional portfolio managers manage the investments, they carry lower risk than other investment instruments.

If you are an investor or are looking to invest to build wealth over time, it is ideal to add mutual funds to your portfolio. This blog will help you understand what is a mutual fund and how it can help you earn good returns in the long term.

Mutual funds offer diversification, professional management, and the potential for long-term wealth creation. Start exploring different options to find the right fund for your goals. Compare mutual fund options now!



Key takeaways

  • A mutual fund is a collection of stocks, bonds, or other securities purchased using the pooled contributions of multiple investors.
  • Mutual funds provide individual investors with access to diversified and professionally managed investment portfolios.
  • These funds are classified based on the types of securities they invest in, their specific investment goals, and the nature of returns they aim to generate.
  • Mutual funds involve costs such as annual fees, expense ratios, and commissions, which can reduce the overall returns for investors.
  • In the United States, many employees invest in mutual funds through employer-sponsored retirement plans. This approach, often referred to as "automatic investing," helps build wealth gradually with lower investment risks compared to other options.

What are mutual funds?

Mutual funds (MFs) are investment options that combine money from several investors and invest it across a range of asset classes. These may include equities (shares), debt instruments such as bonds and debentures, money market instruments, and other securities. Mutual funds are managed by Asset Management Companies (AMCs), which provide professional fund management and help investors benefit from diversification within a regulated investment framework.

Instead of investing directly in individual securities, investors use mutual funds as a convenient platform to access a diversified portfolio. This makes investing simpler and more accessible, especially for those who may not have the expertise, time, or resources to manage investments on their own. Mutual funds also help reduce risk by spreading investments across different assets and sectors. Overall, they offer an efficient and structured way for individuals to participate in financial markets and work towards their long-term financial goals.


How do mutual funds work?


  • Mutual funds work by collecting money from multiple investors and investing it in different financial assets.
  • Investors contribute their funds to a specific mutual fund scheme along with other participants.
  • Based on the amount invested, investors receive mutual fund units at the current NAV (Net Asset Value).
  • NAV represents the per-unit value of the mutual fund at a particular time.
  • The value of these units may increase or decrease depending on the performance of the fund’s investments.
  • Investors can earn returns from mutual funds in two main ways.
  • The first is through regular or periodic income, such as dividends or interest generated by the investments.
  • The second is through capital appreciation, where the value of the fund increases over time.
  • Capital gains are realised when investors redeem or sell their mutual fund units.
  • Mutual funds offer a simple and convenient way to invest and grow wealth over the long term.


Benefits of mutual funds

  • Professional Fund Management
    Mutual funds are managed by experienced fund managers who carefully analyse market trends and investment opportunities. Their expertise helps investors make informed investment decisions without needing in-depth market knowledge.
  • Diversification
    Mutual funds invest across different sectors, industries, and asset classes. This diversification helps reduce overall investment risk, as losses in one area may be balanced by gains in another.
  • Affordable Investment Option
    Investors can begin investing in mutual funds with as little as Rs. 100. This makes mutual funds accessible to individuals with different financial goals and investment capacities.
  • Liquidity
    Mutual funds offer easy access to invested money during emergencies. Investors can redeem their units and receive the current market value (NAV), depending on the type of mutual fund scheme.
  • Tax Benefits
    Certain mutual fund schemes, such as ELSS funds, provide tax-saving benefits. Under the old tax regime, investors can claim deductions of up to Rs. 1,50,000 under Section 80C of the Income Tax Act.
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Different types of mutual funds


SEBI’s five broad mutual fund categories are:


  1. Equity-oriented schemes
  2. Debt-oriented schemes
  3. Hybrid schemes
  4. Solution-oriented schemes
  5. Others 

Each category serves a unique purpose, whether it's wealth creation, stability, or income generation. Explore the different mutual fund types below to find the one that best suits your financial needs:


Equity-OrientedDebt-OrientedHybridSolution-OrientedOthers
Multi cap FundOvernight FundConservative Hybrid FundRetirement FundIndex Funds / ETF
Flexi cap FundLiquid FundBalanced Hybrid FundChildren’s FundFOFs: Domestic / Overseas
Large cap FundUltra short duration FundAggressive Hybrid Fund  
Mid cap FundLow duration FundDynamic asset allocation or balanced advantage Fund  
Small cap FundMoney market FundMulti-asset allocation Fund  
Large & mid cap FundShort duration FundArbitrage Fund  
Dividend yield FundMedium duration FundEquity savings Fund  
Value / contra FundMedium to Long Duration Fund   
Focused FundLong duration Fund   
Sectoral / Thematic FundDynamic Bond Fund   
ELSS FundCorporate bond Fund   
 Credit risk Fund   
 Banking / PSU Fund   
 Gilt Fund   
 Gilt 10-year constant maturity Fund   
 Floater Fund   


Different ways of investing in mutual funds

There are two modes of investing in mutual funds:

Lumpsum investment

When you possess a substantial amount for investment, the lumpsum mode allows you to invest the entire sum at once. For instance, if you have Rs. 10 lakh to invest, you can opt for a lumpsum investment, allocating the entire amount in a chosen mutual fund. The units you receive depend on the Net Asset Value (NAV) of the fund on that particular day. If the NAV is Rs. 100, your investment of Rs 10 lakh would secure you 10,000 units of the mutual fund. Lumpsum investment offers a quick entry into the market, capturing the fund's current value in one go. You can also take help of lumpsum calculator to predict the future value of your investments.

Systematic Investment Plan (SIP)

For those looking to invest smaller amounts periodically, the Systematic Investment Plan (SIP) is a flexible and convenient option. In contrast to lumpsum, SIP allows investors to commit to regular investments over time. Suppose you can invest Rs. 1,000 per month for 12 months. SIP aligns with your cash flows, promoting consistent and disciplined investing. Whether monthly, or quarterly, SIP adapts to your financial rhythm. This approach not only accommodates budget constraints but also leverages the benefit of rupee cost averaging over time, mitigating the impact of market volatility.

Mutual fund objectives

Mutual funds primarily aim to offer investors a convenient way to invest in diversified portfolios, minimising risks and enhancing returns through professional management. Here are some key objectives of mutual funds:

1. Capital growth

The primary goal of many mutual funds is to grow the initial investment over time. By allocating funds to growth-oriented assets such as equities, these funds enable investors to build wealth by benefiting from increasing asset values over the long term.

2. Income generation

Certain mutual funds are designed to provide a steady income by investing in fixed-income instruments like bonds and government securities. This objective is ideal for individuals who prioritise stable returns with minimal exposure to market fluctuations.

3. Risk reduction through diversification

Mutual funds spread investments across various asset classes, such as equities, bonds, and other instruments. This diversification reduces the impact of poor performance in any single asset, thus lowering overall investment risk.

4. Liquidity

Open-ended mutual funds allow investors to buy or redeem units at any time, offering flexibility and easy access to their funds. This ensures that investors can manage their investments efficiently without being tied to long lock-in periods.

5. Tax benefits

Certain mutual funds, such as Equity Linked Savings Schemes (ELSS), provide tax deductions under Section 80C of the Income Tax Act in India. These schemes enable investors to save on taxes while simultaneously growing their wealth.

 

Ideal investors for mutual funds: Are you one of them

Mutual funds are ideal investment instruments because a long-term investment can multiply significantly because of the compounding effect, where the interest is compounded and increases with every cycle. Although there are no restrictions on who can invest in a mutual fund, they are particularly well-suited for the following types of investors:

  • Beginner investor: Mutual funds are managed by expert portfolio managers, making them ideal for those new to investing who may not have the knowledge or time to pick individual stocks or bonds. Start with just Rs. 100/month & see how much you’ll make!
  • Risk-averse investors: Mutual funds have lower associated risk when compared to other investment instruments. They offer effective diversification, which spreads risk across a variety of assets, making them ideal for investors with a lower risk tolerance.
  • Investors with a low capital amount: Investors can start investing in mutual funds through SIPs with an amount as low as Rs. 100. Hence, they are ideal for investors who want to start investing with a relatively small amount of money.
  • Retirement savers: Mutual funds allow wealth to be built over time due to compounding. Many mutual funds are designed for long-term growth, making them a good option for individuals saving for retirement or any other big future expense.
  • Income seekers: Certain types of mutual funds, like bond or dividend-focused funds, are designed to provide regular income, making them ideal for investors who need a steady cash flow.

Role of mutual funds in India

Mutual funds play a crucial role in India by offering individual investors an accessible and diversified avenue to achieve their financial objectives. With professional management and reduced risk, they cater to a wide range of investment needs. Key roles of mutual funds in India include:

1. Facilitating wealth creation

Mutual funds enable investors to grow their wealth over time by providing access to diversified portfolios that include equities, debt instruments, or a combination of both.

2. Supporting capital market development

By channeling individual and institutional savings into the capital markets, mutual funds enhance liquidity and depth, contributing significantly to the expansion of India’s financial markets.

3. Promoting disciplined savings

Through options like Systematic Investment Plans (SIPs), mutual funds encourage individuals to develop a habit of regular investing, making it easier for them to build a disciplined approach towards wealth accumulation.

4. Managing investment risks

By spreading investments across various asset classes, mutual funds reduce the risks associated with reliance on a single stock or bond. This diversification helps protect investors’ capital against market fluctuations.

5. Advancing financial inclusion

Mutual funds simplify the investment process, making it accessible to individuals without substantial financial knowledge or large initial capital. This inclusivity broadens participation in India’s financial ecosystem.



What fees are charged by mutual funds

Mutual funds pool money from various investors and employ a portfolio manager, who uses the pooled money to invest in a host of securities such as equities, bonds, etc. Each investor owns units or shares of the mutual fund, representing a portion of its holdings. However, the mutual fund house levies a few fees on the investor for managing the mutual fund and earning from the buying and selling of the mutual fund units. It is important to understand all the attached fees in a mutual fund scheme in detail, as they can lower your investment value over time.

Here are the fees associated with investing in mutual funds:

Expense ratio

The expense ratio is the annual fee the mutual fund house charges for a specific scheme, payable by the investors. The fund house levies this fee for its work to manage the overall mutual fund scheme. The expense ratio is represented as a percentage of the fund’s average asset under management (AUM). The expense ratio includes numerous costs, such as management, administrative, marketing, and distribution costs. For example, if the expense ratio of a mutual fund house is 1.5% and you’ve invested Rs. 10,000, you will pay Rs. 150 per year as a fee.

Entry load

An entry load is a charge levied by a mutual fund house on investors when they buy mutual fund units in a specific mutual fund scheme. It is a one-time charge and covers the distribution costs and initial expenses of the fund. However, in 2009, the Securities and Exchange Board of India abolished entry loads for most mutual funds . This means that most mutual funds do not charge entry loads.

Exit load

An exit load is a fee the mutual fund house charges from investors when they sell or redeem their existing mutual fund units within a specific timeframe. The main aim of levying the exit load on investors is to discourage them from selling their mutual fund units in the short term and ensure that they remain invested for the long term. For example, the mutual fund house may charge an exit load of 1% if you redeem your units within one year of purchase. After this period, the exit load usually drops to zero.

Management fee

The management fee is included in a mutual fund scheme's expense ratio and compensates the fund manager for their expertise and work managing the fund’s portfolio. The management fee varies depending on the fund’s strategy and the level of active management involved. Actively managed funds usually have higher management fees compared to passively managed funds (like index funds) because they require more research and active decision-making.

Classes of mutual fund shares

Mutual funds offer different classes of shares, which significantly vary in their fee structure and benefits. Class A shares have a front-end load, which requires the investors to pay a sales charge or a commission at the time of purchasing the units. These shares generally have a lower annual expense ratio compared to other mutual fund classes.

Class B shares require investors to pay a fee when selling the units. The fee, called contingent deferred sales charge (CDSC), is a reducing fee that becomes zero after several years. Class B shares generally have higher annual fees than Class A shares and often convert to Class A shares after a predetermined period.

Class C shares come with no front or end load but have a small back-end load if they are sold within a year. They also come with a higher expense ratio but do not convert to Class A shares like Class B shares.

Understand mutual fund taxation

When you sell your mutual fund units, you earn capital gains and are liable to pay a tax on them based on the period after which you have sold the units. The mutual fund taxation laws were changed by the Finance Ministry in the new Union Budget of 2024. Now, for equity funds, short-term capital gains are taxed at 20%, while long-term capital gains above Rs. 1.25 lakh are taxed at 12.5%. For debt funds, STCG is taxed as per the investor’s income slab, and LTCG is taxed at 12.5% without indexation.

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How to calculate mutual fund returns?

Calculating mutual fund returns involves several methods, each offering unique insights into investment performance.

  1. Absolute returns: Absolute returns measure the overall percentage change in a mutual fund's value over a specific period, irrespective of time or compounding. Calculated using the formula:
    Absolute Return = (Present NAV – Initial NAV) / Initial NAV × 100
    For instance, if your initial NAV was 30 and the present NAV is 45 over nine months, the absolute returns would be 50%.
     
  2. Annualised returns: To assess annual returns, Simple Annualized Return (SAR) is used. Derived from the absolute return, the formula is:
    SAR = [(1 + Absolute Rate of Return) ^ (365/number of days)] – 1
    Considering the previous example,
    Simple Annualised Return = [(1 + 50%) ^ (365/270)] – 1
    Therefore, with a 50% absolute return, the simple annualized return is approximately 73%.
     
  3. Compounded Annual Growth Rate (CAGR): CAGR offers an average annual growth rate over multiple years, providing a standardized measure. The formula is:
    CAGR = {[(Present NAV / Initial NAV) ^ (1 / Number of years)] - 1} × 100
    To calculate the compounded annual growth rate (CAGR) for a lump sum investment, let's use the given example:
    Assuming you invested Rs. 10 lakh in a mutual fund scheme in 2016 with an initial NAV of Rs. 200, and after five years in 2021, the NAV increased to Rs. 700.
    CAGR = {[(700 / 200) ^ (1 / 5)] - 1} × 100
    CAGR ≈ 28.47%
    Alternatively, if you prefer using Excel, you can use the RRI function:
    =RRI(Nper, PV, IV)
    Where:
    Nper = Time in periods (calculated in months)
    PV = Present Value (ending value)
    IV = Initial Value (beginning value)
    This will give you the CAGR, which you can format as a percentage to obtain the result.
     
  4. Extended Internal Rate of Return (XIRR): XIRR is an advanced method accounting for timing and amount of cash flows. It's crucial for investments with varying durations, such as Systematic Investment Plans (SIPs). The formula is:
    XIRR = XIRR(Values, Dates, Guess)
    To calculate SIP returns using XIRR in Excel, create a table with SIP dates and amounts, add redemption details, and use the XIRR function, formatting the result as a percentage. This method provides accurate returns when cash flows vary.

Terms used in mutual funds

Here is the brief terminology used in mutual funds:

  • AMC or fund houses: Asset Management Company manages all aspects of the mutual fund, including marketing, collections, investments, and investor transactions.
  • NAV: Net Asset Value represents the market value of the mutual fund's investment portfolio divided by the total number of units, serving as the price for buying or redeeming mutual fund units.
  • SIP: Systematic Investment Plan involves regular and periodic investments in mutual funds to average out investment costs, offering flexibility in investment frequency (monthly or quarterly).
  • NFO: New Fund Offer denotes the period when a mutual fund opens for investments from investors for the first time, typically lasting fifteen days.
  • AUM: Assets Under Management represents the total value of investments managed by the mutual fund.
  • CAGR: Compound Annual Growth Rate signifies the proportional growth rate from year to year for a mutual fund.
  • Exit load: Exit load is the fee charged by AMC to investors who exit mutual funds during the lock-in period and redeem their investments.
  • XIRR: Extended Internal Rate of Return calculates aggregate returns on investments when both inflows and outflows occur irregularly over time.


Who should invest in mutual funds


  • Suitable for Every Investor
    Whether you are a cautious, conservative, or moderate investor, there are mutual fund options designed to match your financial goals and risk appetite.
  • No Need to Track Markets Daily
    Mutual funds are ideal for individuals who do not have the time or expertise to monitor stock market movements or manage investments regularly.
  • Save Tax with ELSS Funds
    If you file your Income Tax Return (ITR) under the old tax regime, investing in Equity Linked Savings Scheme (ELSS) funds can help you claim tax deductions of up to Rs. 1.5 lakh annually under Section 80C of the Income Tax Act.
  • Plan for Important Life Goals
    Mutual funds can help you achieve key financial goals such as buying a home, funding marriage expenses, or planning for retirement.


How to invest in mutual funds?

Here is the process of investing in mutual funds in India:

  • Investment goals: Determine your investment goals, risk tolerance, and investment horizon before investing. This will help you analyse and compare various mutual funds.
  • Open an account: Open an account with a stockbroker or financial institution. You can also open an account on the mutual fund company’s website.
  • Complete your KYC: Complete the Know Your Customer (KYC) process while opening the account. You can do this online through eKYC or offline by submitting documents like ID proof, address proof, and a photograph.
  • Choose mutual funds: Analyse and compare various mutual funds based on your investment goals, risk tolerance, and time horizon. Consider mutual funds across types such as debt, equity, hybrid, balanced, etc.
  • Select investment mode: Determine whether you want to invest a lump sum amount or through a Systematic Investment Plan (SIP). If through SIP, choose the investment amount and the frequency.
  • Monitor your investment: Regularly review your mutual fund’s performance to ensure it meets your financial goals, risk tolerance, and horizon, and make adjustments if necessary.

Browse mutual funds by popular categories: Equity Mutual Funds | NFO Mutual Funds | Debt Mutual Funds | Hybrid Mutual Funds | ELSS Mutual Funds | Multi Cap Mutual Funds | Thematic Mutual Funds | Aggressive Hybrid Funds | Small Cap Mutual Funds | Large Cap Mutual Funds | Mid Cap Mutual Funds | Liquid Mutual Funds

How are mutual funds taxed?

  • Equity mutual funds: Short-term gains (holding under 12 months) are taxed at 20%, while long-term gains above Rs. 1.25 lakh are taxed at 12.5%.
  • Debt mutual funds: Short-term gains are taxed as per your income tax slab, while long-term gains are taxed at 12.5% without indexation.
  • Dividends: Dividend payouts from mutual funds are added to your taxable income and taxed as per your slab.
  • STT (Securities Transaction Tax): Applies to equity and equity-oriented mutual funds during redemption.

Disadvantages of mutual funds

  • Market risk: Mutual funds are exposed to market volatility. Equity-oriented schemes fluctuate based on stock market performance, while debt funds can be affected by interest rate movements. This means your returns are not guaranteed and may vary significantly during uncertain market conditions.
  • Costs and fees: Mutual funds charge an expense ratio, which includes management fees, administrative costs, and distribution costs. Over time, high expense ratios can reduce your overall returns. Some funds also charge exit loads for early withdrawal, adding to investor expenses.
  • No control over portfolio: When you invest in a mutual fund, the fund manager decides which securities to buy or sell. Investors have no direct control over stock selection or timing, which may not always align with personal preferences or strategies.
  • Performance depends on fund manager: The success of a mutual fund largely depends on the expertise of the fund manager. Poor decision-making or weak market understanding can negatively impact returns, even in favorable market conditions.
  • Tax implications: Certain redemptions may attract capital gains tax. Short-term gains can be taxed at higher rates, reducing net returns. Additionally, dividends become part of taxable income, increasing tax liability for those in higher income brackets.
  • Liquidity constraints: While mutual funds are generally liquid, some funds—like ELSS (with a 3-year lock-in) or certain debt funds—may restrict withdrawals. Closed-ended funds also limit liquidity until maturity.
  • Benchmark underperformance: Some active funds may fail to outperform their benchmark indices despite charging higher fees. This underperformance makes them less attractive compared to low-cost index funds.
  • Misalignment with goals: Choosing the wrong type of mutual fund for your risk appetite or investment horizon can lead to losses or unmet financial goals, especially for new investors.

 

Conclusion

Mutual funds offer a smart way to get into investing without needing to understand everything about the stock market. With so many different types of funds available, there is something for everyone's financial goals. Whether you are saving for a significant dream or building a financial safety net, mutual funds could be your key to a better financial future. So start investing now.

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Frequently asked questions

What is a mutual fund in simple words?

A mutual fund collects money from many investors and uses it to invest in things like stocks, bonds, and short-term debt. The collection of all these investments is called the fund’s portfolio. When you invest in a mutual fund, you buy shares that represent your ownership in the fund and your share of the income it earns.

Is mutual fund good or bad?

Mutual funds can be beneficial or detrimental depending on factors like investment objectives, risk appetite, and fund performance. While they offer diversification, they also carry market risk. Thorough research and understanding individual financial goals are crucial for determining suitability.

Is mutual fund SIP safe?

Mutual fund Systematic Investment Plans (SIPs) are generally considered safe for long-term investors. SIPs offer advantages like rupee-cost averaging and disciplined investing, which help mitigate market volatility over time. However, all investments carry some level of risk.

Can I withdraw mutual funds anytime?

Most mutual funds allow investors to withdraw their funds at any time, subject to specific conditions such as exit loads or minimum holding periods. It's advisable to review the terms and conditions of the fund before making withdrawals.

Is mutual fund tax-free?

Mutual funds are not entirely tax-free. Depending on factors such as the type of fund, holding period, and gains, investors may be subject to taxes like capital gains tax on their mutual fund investments.

Are mutual funds profitable?

Mutual funds can be profitable but returns are not guaranteed. They vary based on factors like market conditions, fund performance, and investment strategy. Past performance does not assure future results.

Can I invest Rs. 100 in a mutual fund?

Some mutual funds allow investors to start with small amounts like Rs. 100 through systematic investment plans (SIPs). This feature enables even small investors to participate in the financial markets gradually over time.

What are the risks of mutual funds?

Risks associated with mutual funds include market risk, liquidity risk, credit risk, and interest rate risk. Additionally, specific types of funds may carry additional risks, such as sector-specific funds or international funds.

Can a mutual fund go to zero?

While it's rare, a mutual fund can theoretically become worthless if all the investments within the fund lose their value. However, prudent diversification and professional management typically mitigate this risk significantly.

How do I buy mutual funds?

You can buy mutual funds either through online brokerage platforms or directly from the fund manager. However, the process of buying mutual funds differs from trading stocks or exchange-traded funds (ETFs) in a few ways:

1. Pricing

The price of a mutual fund is determined at the end of each trading day based on its net asset value (NAV). The NAV is calculated by adding up the value of the fund’s assets, subtracting expenses, and dividing the result by the total number of shares. If you place an order during the day, your purchase will be processed at the NAV determined after the market closes. If you order after the market closes, your transaction will use the next day’s NAV.

2. Minimum investment

Many mutual funds require a minimum investment, often starting at a few thousand rupees. You can choose to invest a specific amount of money or purchase a certain number of fund units, depending on your preference.

How are mutual fund fees regulated in India?

In India, mutual fund fees are regulated by the Securities and Exchange Board of India (SEBI), which sets limits on the total expense ratio (TER) that funds can charge.

How is the cost of a mutual fund unit calculated?

The cost of a mutual fund unit is determined by its Net Asset Value (NAV). NAV is calculated by dividing the total value of the fund’s assets (like stocks, bonds, and cash) minus its liabilities by the total number of units outstanding.

Who manages a mutual fund?

Mutual funds are managed by a professional fund manager or a team of managers who make investment decisions based on the fund's objectives. They select and monitor the securities in the fund’s portfolio to achieve the best possible returns for investors.

What are the risks associated with mutual funds?

Mutual funds carry market risk, where the investment value can reduce due to price fluctuations in the securities prices. They also have liquidity risk if the fund cannot easily sell assets to meet redemptions. Furthermore, fund-specific risks, like poor management decisions, are also risky.

How do mutual fund fees affect my investment?

Mutual fund fees, such as expense ratios and management fees, reduce your overall returns by reducing a portion of your investment gains or principal. Higher fees can significantly impact long-term gains, especially with compounding.

What are the tax implications of investing in mutual funds?

The tax implications of mutual funds depend on the type of fund and the holding period. For equity funds, short-term capital gains (STCG) are taxed at 20%, while long-term capital gains (LTCG) above Rs. 1.25 lakh are taxed at 12.5%. For debt funds, STCG is taxed as per the investor’s income slab, and LTCG is taxed at 12.5% without indexation.

What are the 4 types of mutual funds?

  • Equity Funds
  • Debt Funds
  • Hybrid Funds
  • Money market Funds

Which is better - FD or mutual fund?

Choosing between a Fixed Deposit (FD) and a mutual fund depends on your goals and risk tolerance. FDs are safer, offer guaranteed returns, and suit short-term needs. However, returns are usually lower and may not beat inflation. Mutual funds carry some risk but can provide higher returns over time, making them better for long-term wealth creation. If you prefer stability, choose an FD; if you can handle market fluctuations for better growth, mutual funds are a better option.

What are the best mutual funds to invest in?

The best mutual funds depend on your goals, risk level, and time horizon. Currently, diversified equity funds, index funds, and flexi-cap funds are popular for long-term growth. For moderate risk, hybrid funds offer balanced exposure. If you prefer safety, consider short-term debt funds. Look for funds with consistent performance, low expense ratios, and strong fund management. Investing regularly through SIPs, even with small amounts like Rs. 1,000, helps manage risk and build wealth steadily over time.

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Disclaimer

Bajaj Finance Limited (“BFL”) is an NBFC offering loans, deposits and third-party wealth management products.

The information contained in this article is for general informational purposes only and does not constitute any financial advice. The content herein has been prepared by BFL on the basis of publicly available information, internal sources and other third-party sources believed to be reliable. However, BFL cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. 

This information should not be relied upon as the sole basis for any investment decisions. Hence, User is advised to independently exercise diligence by verifying complete information, including by consulting independent financial experts, if any, and the investor shall be the sole owner of the decision taken, if any, about suitability of the same.

Disclaimer:

Bajaj Finance Limited ("BFL") is registered with the Association of Mutual Funds in India ("AMFI") as a distributor of third party Mutual Funds (shortly referred as 'Mutual Funds) with ARN No. 90319

BFL does NOT:

(i) provide investment advisory services in any manner or form:

(ii) carry customized/personalized suitability assessment:

(iii) carry independent research or analysis, including on any Mutual Fund schemes or other investments; and provide any guarantee of return on investment.

In addition to displaying the Mutual fund products of Asset Management Companies, some general information is sourced from third parties, is also displayed on As-is basis, which should NOT be construed as any solicitation or attempt to effect transactions in securities or the rendering any investment advice. Mutual Funds are subject to market risks, including loss of principal amount and Investor should read all Scheme/Offer related documents carefully. The NAV of units issued under the Schemes of mutual funds can go up or down depending on the factors and forces affecting capital markets and may also be affected by changes in the general level of interest rates. The NAV of the units issued under the scheme may be affected, inter-alia by changes in the interest rates, trading volumes, settlement periods, transfer procedures and performance of individual securities forming part of the Mutual Fund. The NAV will inter-alia be exposed to Price/Interest Rate Risk and Credit Risk. Past performance of any scheme of the Mutual fund do not indicate the future performance of the Schemes of the Mutual Fund. BFL shall not be responsible or liable for any loss or shortfall incurred by the investors. There may be other/better alternatives to the investment avenues displayed by BFL. Hence, the final investment decision shall at all times exclusively remain with the investor alone and BFL shall not be liable or responsible for any consequences thereof.

Investment by a person residing outside the territorial jurisdiction of India is not acceptable nor permitted.

Disclaimer on Risk-O-Meter:

Investors are advised before investing to evaluate a scheme not only on the basis of the Product labeling (including the Riskometer) but also on other quantitative and qualitative factors such as performance, portfolio, fund managers, asset manager, etc, and shall also consult their Professional advisors, if they are unsure about the suitability of the scheme before investing.


Disclosure: Bajaj Finance Limited (BFL) is a distributor of Mutual Funds with ARN - 90319 and distributes mutual funds of Bajaj Finserv Asset Management Limited (BFSAMC). BFL receives commission towards distribution of mutual fund products. BFSAMC is a group company of BFL, carrying business on arm’s length basis without any conflict of interest and in accordance with the prevailing law / regulation.