Mutual Fund Investment: Invest Online in Mutual Funds in India (2024)

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What are Mutual Funds?

It is an investment vehicle where multiple investors come together and pool their funds. This pooled money is then invested by the fund manager across various asset classes including equity, debt, gold, and other securities to generate returns. The gains and losses incurred from such investments are divided among investors in the proportion of the share of investment.

To learn more about them, read our detailed guide on What are mutual funds.

Professionally Managed

One of the key benefits of investing in these funds is that your money is managed by professional money managers who have years of investing experience.

Liquidity

It is the ease of buying and selling an investment. Mutual Funds offer superior liquidity compared to some of the other instruments as you can buy and sell them anytime you want.

Returns

Like any investment product, the performance of these funds are measured in terms of the kind of returns they deliver. Historically, mutual fund returns have been higher than the returns delivered by other traditional investment options like Bank FDs, RDs, PPF, etc.

Affordability

You can start your investments in these funds with as low as ₹ 500. Therefore, you don't need large sums to start investing.

Diversification

As mutual funds invest in a basket of stocks, bonds, etc., you can own a diversified portfolio even with a small investment amount, this helps reduce risk as well.

Well Regulated

Mutual fund schemes are regulated by the SEBI. The tight regulations ensure transparent processes and protect the investors' interests.

SIP (Systematic Investment Plan)

SIP allows you to invest a fixed sum at regular intervals. SIP is one of the most recommended ways to invest in mutual fund schemes as it is convenient. It also helps you average out the cost at which you buy the units of these funds. Read more about, What is Systematic Investment Plans (SIP)?

Equity Mutual Funds

Equity funds invest a majority of their assets in stocks. These funds are classified into different categories based on the market cap of the stocks they invest in.

Types of Equity funds:

• Large-Cap Funds

  These funds invest at least 80% of their assets in the top 100 companies by market capitalization.

• Mid-Cap Funds

  These funds invest at least 65% of their assets in the next 150 (101st to 250th) companies ranked by market capitalization.

• Small-Cap funds

  Such funds invest at least 65% of their assets in companies ranked 251 and above by market capitalization.

• Multi-Cap Funds

  These funds invest at least 25% of their assets in each of the large, mid, and small-cap stocks.

Debt Mutual Funds

Debt funds generate returns by lending money to corporates and the government by buying their debt papers. These funds are classified into different categories based on their lending period and credit quality of the papers.

Types of Debt funds:

• Money Market Funds

  These funds generate returns by lending to companies or governments for up to 1 year.

• Corporate Bond Funds

  These funds earn returns by lending mostly (at least 80%) to companies with the highest-rated debt papers.

• Overnight funds

  These funds earn their returns by lending to companies or governments for one business day.

• Liquid Funds

  These funds generate their returns by lending to companies or governments for up to 91 days.

Hybrid Funds

Hybrid funds invest in a mix of asset classes, including equity, debt, or gold. There are multiple categories of hybrid funds based on how much they allocate across different asset classes.

Types of Hybrid funds:

• Aggressive Hybrid

  These funds have to invest at least 65% of their assets in equities while it can't exceed 80%. The rest goes into debt.

• Multi-Asset Allocation

  These are hybrid funds that invest at least 10% of the total of their assets across at least three asset classes, such as equity, debt, gold, etc.

• Dynamic Asset Allocation funds

  See Also

  How to Buy Mutual Funds Online

  Also known as Balanced Advantage Funds, these funds can go up to 0-100% in equities or debt based on predefined asset allocation models they follow.

• Arbitrage Funds

  These funds generate returns by using opportunities of price differences of securities in different markets.

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