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Everything you need to know about Mutual Funds

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Created on
May 24, 2023


What’s Inside

When the talk is about investments and savings, what comes to mind first? Maybe the answer is real estate, gold, or bank fixed deposits. Right? Previously, most Indians relied on them. But the scenario has evolved far from it. Over the last few decades, mutual funds have been considered a great investment alternative.

Yet, people may be sceptical about investing if they don't know about them in detail. Here's a short guide that will help you understand everything about mutual funds.

What Do You Mean By "Mutual Funds"?

A mutual fund is an investment process where funds are raised to invest in different equities, government securities, bonds, and other assets. Companies eligible to run mutual funds build fund houses that handle the transactions and manage the funds.

Things to Remember Before Investing in Mutual Funds

Before investing in mutual funds, you must learn to invest in mutual funds to make a secure investment.

1. Risk Levels Are Different in MF Categories

The prime factor in investing in MFs is considering the risk factors. No one can claim that this fund category is entirely risk-free, and the other has high risk. It all depends on different scales and parameters.

2. Higher Returns with Direct Schemes

There is an expense ratio for each fund. Compared to the regular ones, direct plans charge less. As a result, you can expect better returns with immediate plans than regular ones. Such standard methods of mutual fund schemes are not different from each other. The only difference is that there is no agent or broker between the immediate plans, so zero commission is applied.

3. Choose Consistent Funds for Good Returns 

Suppose a particular MF gives a 10% consistent return, and another one provides +17% returns in the first year and -10% returns in the second year. So, where is the consistency? If a fund faces a 6% fall in a year, it has to generate around 11% returns to cover the loss. 5% return. It means the fund that can maintain consistency in return is better for a long-term basis.

4. Invest in a Disciplined Way with Sips

Automated investments via SIPs are the best way to manage your investments and savings with discipline in mutual funds. They also keep you safe from market volatility. You can buy more units at the same price when the market drops and generate higher returns.

5. Learn About Mutual Funds Based On Their Types

Learn about mutual funds based on their structures, fund size, securities, and investment strategies. You can classify them into different types.

  1. Equity Mutual Funds: These funds are more suitable for long-term investments. Though they come with higher risks, they also offer higher returns. Here are some of the types to invest in -
  • Large-cap funds
  • Mid-cap funds
  • Small-cap funds
  • ELSS
  • Multi cap funds
  • International funds
  • Investment funds
  1. Debt Mutual Funds: Debt mutual funds usually do not get affected by stock market volatility. As a result, it offers more stable returns than equity mutual funds. Let's look at a few types of debt mutual funds.
  • Liquid funds
  • Overnight funds
  • Money market funds
  • Banking and PSU funds
  • Gift funds
  • Short duration funds
  1. Hybrid Funds: These funds are great for giving an idea of diversified exposure to various asset classes. Based on the allocation and debt, this particular type of fund is categorised in -
  •  Aggressive hybrid funds
  • Conservative hybrid funds
  • Balanced advantage funds

Summing it up

Mutual funds are the most reliable, time-tested method for growing wealth. The potential to offer higher returns on your capital is commendable. If you plan to invest, Mutual Fund investments on Fi are commission-free. With its intuitive user interface, suited for novice & seasoned investors, you can select from over 900 direct Mutual Funds. Plus, Fi's 100% secure as it functions under the guidance of epiFi Wealth, a SEBI-registered investment advisor. To help simplify the steps involved, you can invest daily, weekly, or monthly via automatic payments or SIPs — created with one screen tap. Moreover, Fi offers 100% flexibility with zero penalties for missed payments. 

Frequently Asked Questions

1. What are the basics of mutual funds?

Mutual funds are highly reliable; you can understand the growth process with time. You can start your investment even with a smaller amount of INR 500 and a reliable trading app. If you want a reliable investment, SIPs would be your best option.

2. Why are mutual funds best for beginners?

Mutual funds are the best options for beginners because there are hundreds of options. As these markets are highly diversified, an individual can perform sufficient research before investing in this market. As a result, the risk is moderate.


Investment and securities are subject to market risks. Please read all the related documents carefully before investing. The contents of this article are for informational purposes only, and not to be taken as a recommendation to buy or sell securities, mutual funds, or any other financial products.
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