{"id":772,"date":"2024-09-10T13:40:32","date_gmt":"2024-09-10T13:40:32","guid":{"rendered":"https:\/\/shoonya.com\/blog\/?p=772"},"modified":"2025-09-26T12:24:24","modified_gmt":"2025-09-26T12:24:24","slug":"mutual-funds-everything-you-should-know","status":"publish","type":"post","link":"https:\/\/shoonya.com\/blog\/mutual-funds-everything-you-should-know\/","title":{"rendered":"Everything You Need to Know About Mutual Funds in India"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_87 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\"><p class=\"ez-toc-title\" style=\"cursor:inherit\"><\/p>\n<\/div><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/shoonya.com\/blog\/mutual-funds-everything-you-should-know\/#History_Of_Mutual_Funds_In_India\" >History Of Mutual Funds In India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/shoonya.com\/blog\/mutual-funds-everything-you-should-know\/#What_Are_Mutual_Funds\" >What Are Mutual Funds?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/shoonya.com\/blog\/mutual-funds-everything-you-should-know\/#Types_of_Mutual_Fund_Schemes\" >Types of Mutual Fund Schemes<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/shoonya.com\/blog\/mutual-funds-everything-you-should-know\/#How_to_Invest_in_Mutual_Funds\" >How to Invest in Mutual Funds<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/shoonya.com\/blog\/mutual-funds-everything-you-should-know\/#Advantages_of_Investing_in_Mutual_Funds\" >Advantages of Investing in Mutual Funds<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/shoonya.com\/blog\/mutual-funds-everything-you-should-know\/#Disadvantages_of_Investing_in_Mutual_Funds\" >Disadvantages of Investing in Mutual Funds<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/shoonya.com\/blog\/mutual-funds-everything-you-should-know\/#SEBI_Categorization_of_Mutual_Funds_Schemes\" >SEBI Categorization of Mutual Funds Schemes<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/shoonya.com\/blog\/mutual-funds-everything-you-should-know\/#Myths_Facts_about_Mutual_Funds\" >Myths &amp; Facts about Mutual Funds<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/shoonya.com\/blog\/mutual-funds-everything-you-should-know\/#Conclusion\" >Conclusion<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/shoonya.com\/blog\/mutual-funds-everything-you-should-know\/#FAQs_Mutual_Fund_Types\" >FAQs| Mutual Fund Types<\/a><\/li><\/ul><\/nav><\/div>\n<div class=\"yoast-breadcrumbs\"><span><span><a href=\"https:\/\/shoonya.com\/blog\/\">Home<\/a><\/span> \u00bb <span><a href=\"https:\/\/shoonya.com\/blog\/investing\/\">Investing<\/a><\/span> \u00bb <span><a href=\"https:\/\/shoonya.com\/blog\/investing\/mutual-funds\/\">Mutual Funds<\/a><\/span> \u00bb <span class=\"breadcrumb_last\" aria-current=\"page\"><strong>Everything You Need to Know About Mutual Funds in India<\/strong><\/span><\/span><\/div>\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Saving money consistently is a challenge many face, especially when unexpected expenses arise. Relying on <strong>fixed deposits or gold<\/strong> may feel safe, but it often limits financial growth. The fear of losing hard-earned money can prevent people from exploring better investment options. What if there was a way to invest that offered both safety and growth? It could ease your concerns and pave the way for a more secure financial future. A diversified approach, like mutual funds, might be the answer.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Today, we will introduce you to one of the most rapidly growing investment options currently\u2014mutual funds\u2014and also shed some light on their advantages and disadvantages.<\/p>\n\n\n\n\n\n<h2 class=\"wp-block-heading\" id=\"0-history-of-mutual-funds-in-india-\"><span class=\"ez-toc-section\" id=\"History_Of_Mutual_Funds_In_India\"><\/span><strong>History Of Mutual Funds In India<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">India\u2019s mutual fund industry began in 1963 with the creation of the Unit Trust of India (UTI). Over the years, the industry has evolved through five key phases, starting with UTI under RBI, followed by public and private sector fund entries, regulatory changes, and significant growth post-2014. Today, the mutual fund sector is a major part of India&#8217;s financial ecosystem.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"1-what-are-mutual-funds-\"><span class=\"ez-toc-section\" id=\"What_Are_Mutual_Funds\"><\/span><strong>What Are Mutual Funds?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">A mutual fund is a pool of money collected from various investors. The goal is to buy a diversified portfolio of bonds, stocks, or other securities. Professional fund managers handle mutual fund products. By investing in mutual funds, you can access a variety of assets. This usually means dealing with lower risk compared to investing directly in individual stocks. You can start with a small amount and choose from different mutual fund types based on your risk tolerance.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong><em><a href=\"https:\/\/shoonya.com\/mutual-funds\"><mark style=\"background-color:rgba(0, 0, 0, 0);color:#d79b30\" class=\"has-inline-color\">Invest in Over 3000 Direct Mutual Funds with Zero Brokerage \u2013 Start Now!<\/mark><\/a><\/em><\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Everything About Mutual Fund Units<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Let\u2019s simplify with an example.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Suppose you and three friends want to buy a pizza that costs \u20b940, but each of you only has \u20b910. Instead of buying separate items, you all pool your \u20b910 each to buy the pizza. Now, you share the pizza based on your contribution.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Total Pizza Cost:<\/strong> \u20b940<\/li>\n\n\n\n<li><strong>Total Slices:<\/strong> 12<\/li>\n\n\n\n<li><strong>Cost Per Slice:<\/strong> \u20b940 \/ 12 = \u20b93.33<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">If you put in \u20b910, you get 3 slices or 3 units. Each slice costs \u20b93.33, so your \u20b910 gets you three slices.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"2-types-of-mutual-fund-schemes\"><span class=\"ez-toc-section\" id=\"Types_of_Mutual_Fund_Schemes\"><\/span>Types of Mutual Fund Schemes<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">There are multiple mutual fund types in India from which you can choose.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Understanding these types can help you pick the right fund for you.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>1. Based on Structure:<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Mutual funds differ in how they\u2019re structured, which affects how you can invest or withdraw your money.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Open-Ended Schemes<\/strong>: These funds are always open for buying and selling shares. It\u2019s flexible and convenient if you want easy access to your cash.<\/li>\n\n\n\n<li><strong>Close-Ended Schemes<\/strong>: These funds have a set end date. You invest when the fund opens and can only redeem your shares at maturity or by selling them on the stock exchange.<\/li>\n\n\n\n<li><strong>Interval Schemes<\/strong>: These allow you to buy or sell shares during certain periods, which happen at regular intervals (like every 15 days).<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>2. Based on Portfolio Management:<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The way a mutual fund\u2019s portfolio is managed affects its performance and cost.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Active Funds<\/strong>: These mutual funds and types are managed by professionals who actively choose which stocks to buy or sell. They try to outperform the market by making strategic decisions.<\/li>\n\n\n\n<li><strong>Passive Funds<\/strong>: These funds track a market index, such as the Nifty 50, and aim to mirror its performance. They usually have lower fees and simpler management.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><strong><em><a href=\"https:\/\/shoonya.com\/trading\"><mark style=\"background-color:rgba(0, 0, 0, 0);color:#d79b30\" class=\"has-inline-color\">Enjoy zero brokerage on all mutual funds.<\/mark><\/a><\/em><\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>3. Based on Investment Objectives:<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Different mutual funds cater to different financial goals.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Growth Funds<\/strong>: These are designed to increase your investment\u2019s value over time. They invest mainly in stocks and are suitable for long-term goals if you can handle some short-term fluctuations.<\/li>\n\n\n\n<li><strong>Income Funds<\/strong>: These focus on providing regular income by investing in fixed-income securities like bonds. They are ideal if you want predictable returns and are looking for regular payouts.<\/li>\n\n\n\n<li><strong>Liquid Funds<\/strong>: These invest in short-term, low-risk instruments. They are perfect if you need quick access to your money while still earning some returns.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>4. Based on Investment Portfolio:<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Funds can be categorized based on where they invest.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Equity Funds<\/strong>: These mutual fund types invest primarily in stocks. They\u2019re suited for those who can tolerate some risk for potentially higher returns.<\/li>\n\n\n\n<li><strong>Debt Funds<\/strong>: Such type of mutual funds invest in bonds and other fixed-income securities. These are a good choice for more conservative investors.<\/li>\n\n\n\n<li><strong>Hybrid Funds<\/strong>: They combine investments in both stocks and bonds. They offer a mix of growth and stability.<\/li>\n\n\n\n<li><strong>Money Market Funds<\/strong>: Invest in very short-term, low-risk instruments. They\u2019re designed to offer safety and liquidity, ideal for short-term needs or as a place to keep cash.<\/li>\n\n\n\n<li><strong>Thematic Funds<\/strong>: They allow you to invest according to particular interests or goals.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><strong><em>Why are these gaining popularity nowadays? <a href=\"https:\/\/shoonya.com\/blog\/thematic-vs-sector-funds\/\"><mark style=\"background-color:rgba(0, 0, 0, 0);color:#d79b30\" class=\"has-inline-color\">Learn more about thematic funds!<\/mark><\/a><\/em><\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Exchange-Traded Funds (ETFs)<\/strong>: You can trade on stock exchanges, which represent a collection of assets. They offer flexibility.<\/li>\n\n\n\n<li><strong>Overseas Funds<\/strong>: Invest in international markets, providing exposure to global investment opportunities.<\/li>\n\n\n\n<li><strong>Fund of Funds<\/strong>: Invest in other mutual funds rather than directly in stocks or bonds. They offer diversified exposure by pooling together various funds.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"3-how-to-invest-in-mutual-funds\"><span class=\"ez-toc-section\" id=\"How_to_Invest_in_Mutual_Funds\"><\/span>How to Invest in Mutual Funds<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Investing in Lump Sum Mutual Funds<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">You can invest in mutual funds effortlessly using the Shoonya web platform. Here\u2019s a simple guide to help you get started:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Log In:<\/strong> Access your Shoonya account at <a href=\"https:\/\/trade.shoonya.com\/\" target=\"_blank\" rel=\"noreferrer noopener\"><mark style=\"background-color:rgba(0, 0, 0, 0);color:#d79b30\" class=\"has-inline-color\">trade.shoonya.com<\/mark><\/a>.<\/li>\n\n\n\n<li><strong>Place an Order:<\/strong> Navigate to the &#8220;Orders&#8221; section and click on &#8220;MF order.&#8221;<\/li>\n\n\n\n<li><strong>Search for the Fund:<\/strong> Find the mutual fund you wish to invest in.<\/li>\n\n\n\n<li><strong>Enter Investment Details:<\/strong> Choose &#8220;Fresh&#8221; for a new investment and specify the amount you want to invest.<\/li>\n\n\n\n<li><strong>Complete Purchase:<\/strong> Click the &#8220;Purchase&#8221; button to finalise your order.<\/li>\n\n\n\n<li><strong>Make Payment:<\/strong> A payment link will be sent to your registered email. Use this link to complete your payment.<\/li>\n\n\n\n<li><strong>Fund Allocation:<\/strong> After payment, your mutual fund units will be allotted to your Demat account within T+2 days.<\/li>\n<\/ol>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Note:<\/strong> Payments should be made using the bank account registered with your Demat account.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Setting Up a Systematic Investment Plan (SIP)<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If you prefer investing through a Systematic Investment Plan (SIP), follow these steps:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Log In:<\/strong> Access your Shoonya account at <a href=\"https:\/\/trade.shoonya.com\/\" target=\"_blank\" rel=\"noreferrer noopener\"><mark style=\"background-color:rgba(0, 0, 0, 0);color:#d79b30\" class=\"has-inline-color\">trade.shoonya.com<\/mark><\/a>.<\/li>\n\n\n\n<li><strong>Select SIP:<\/strong> Go to &#8220;Orders&#8221; and click on &#8220;XSIP.&#8221;<\/li>\n\n\n\n<li><strong>Choose the Fund:<\/strong> Select the mutual fund for which you want to set up an SIP.<\/li>\n\n\n\n<li><strong>Create Mandate ID:<\/strong> If this is your first SIP with Shoonya, you need to create a Mandate ID. Enter the Mandate amount and validity date.<\/li>\n<\/ol>\n\n\n\n<p class=\"wp-block-paragraph\"><strong><em><a href=\"https:\/\/shoonya.com\/blog\/sip-calculator\/\" target=\"_blank\" rel=\"noreferrer noopener\"><mark style=\"background-color:rgba(0, 0, 0, 0);color:#d79b30\" class=\"has-inline-color\">Use the Mutual Fund SIP Calculator to Plan Your Investments \u2013 Try Now!<\/mark><\/a><\/em><\/strong><\/p>\n\n\n\n<ol start=\"5\" class=\"wp-block-list\">\n<li><strong>Authenticate Mandate:<\/strong> Submit the details and wait for the Mandate authentication link sent to your email. Approval typically takes 24 hours.<\/li>\n\n\n\n<li><strong>Set Up SIP:<\/strong> Once approved, return to &#8220;XSIP,&#8221; enter the SIP amount, and select &#8220;Fresh&#8221; as the transaction type.<\/li>\n\n\n\n<li><strong>Choose Debit Date:<\/strong> Specify the date for monthly debits directly from your registered bank.<\/li>\n\n\n\n<li><strong>Specify Installments:<\/strong> Choose &#8220;Monthly&#8221; for monthly debits and specify the number of instalments (e.g., 24 instalments for a 2-year SIP).<\/li>\n<\/ol>\n\n\n\n<p class=\"wp-block-paragraph\">This process makes it easy to invest systematically over time<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"4-advantages-of-investing-in-mutual-funds\"><span class=\"ez-toc-section\" id=\"Advantages_of_Investing_in_Mutual_Funds\"><\/span>Advantages of Investing in Mutual Funds<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Here\u2019s a look at why they might be a good choice for you:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Expert Investment Management:<\/strong><\/li>\n<\/ol>\n\n\n\n<p class=\"wp-block-paragraph\">Managing investments can be time-consuming and complex. Mutual funds are governed by professional money managers who have the expertise and resources to handle this for you.<\/p>\n\n\n\n<ol start=\"2\" class=\"wp-block-list\">\n<li><strong>Risk Management:<\/strong>&nbsp;<\/li>\n<\/ol>\n\n\n\n<p class=\"wp-block-paragraph\">One of the biggest benefits of mutual funds is the ability to spread your investments across various assets. If one part of the fund performs poorly, other investments might perform better, balancing out the overall risk.<\/p>\n\n\n\n<ol start=\"3\" class=\"wp-block-list\">\n<li><strong>Affordability &amp; Comfort<\/strong><\/li>\n<\/ol>\n\n\n\n<p class=\"wp-block-paragraph\">Buying all the individual securities a mutual fund holds can be expensive. Mutual funds allow you to invest in a broad range of assets with a relatively small amount of money.<\/p>\n\n\n\n<ol start=\"4\" class=\"wp-block-list\">\n<li><strong>Liquidity<\/strong>&nbsp;<\/li>\n<\/ol>\n\n\n\n<p class=\"wp-block-paragraph\">Mutual funds generally offer easy access to your money. For open-ended funds, you can redeem your units on any business day. However, some funds, like close-ended or tax-saving funds, have specific lock-in periods.<\/p>\n\n\n\n<ol start=\"5\" class=\"wp-block-list\">\n<li><strong>Well-Regulated<\/strong><\/li>\n<\/ol>\n\n\n\n<p class=\"wp-block-paragraph\">Mutual funds in India are regulated by the Securities and Exchange Board of India (SEBI). This regulation helps ensure that mutual funds are managed fairly.<\/p>\n\n\n\n<ol start=\"6\" class=\"wp-block-list\">\n<li><strong>Tax Benefits<\/strong>&nbsp;<\/li>\n<\/ol>\n\n\n\n<p class=\"wp-block-paragraph\">Investing in certain mutual funds, like Equity Linked Savings Schemes (ELSS), can offer tax benefits under Section 80C of the Income Tax Act. Additionally, long-term investments in mutual funds are often more tax-efficient.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"5-disadvantages-of-investing-in-mutual-funds\"><span class=\"ez-toc-section\" id=\"Disadvantages_of_Investing_in_Mutual_Funds\"><\/span>Disadvantages of Investing in Mutual Funds<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">While mutual funds offer several advantages, they also come with some drawbacks.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Here\u2019s a look at the potential disadvantages to keep in mind:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Management Fees<\/strong>&nbsp;<\/li>\n<\/ol>\n\n\n\n<p class=\"wp-block-paragraph\">Even though mutual funds have relatively low costs, you still have to pay management fees, known as the expense ratio. For actively managed funds, these fees can be higher compared to passive funds.<\/p>\n\n\n\n<ol start=\"2\" class=\"wp-block-list\">\n<li><strong>Market Risk<\/strong>&nbsp;<\/li>\n<\/ol>\n\n\n\n<p class=\"wp-block-paragraph\">Mutual funds are subject to market risk. This means that the value of your investment can go up or down based on market conditions.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><br>3. <strong>Tax Implications<\/strong>&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">While some mutual funds offer tax benefits, others might not. Additionally, when a fund manager buys or sells securities within the fund, it can trigger capital gains taxes, which might impact your overall returns.<\/p>\n\n\n\n<ol start=\"3\" class=\"wp-block-list\">\n<li><strong>Performance Variability<\/strong>&nbsp;<\/li>\n<\/ol>\n\n\n\n<p class=\"wp-block-paragraph\">The performance of mutual funds can vary significantly. It is important for you to actively research and understand a fund\u2019s historical performance and management style.<\/p>\n\n\n\n<ol start=\"4\" class=\"wp-block-list\">\n<li><strong>Hidden Costs<\/strong>&nbsp;<\/li>\n<\/ol>\n\n\n\n<p class=\"wp-block-paragraph\">Some mutual fund types may have additional fees or charges. These hidden costs can reduce your overall returns.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"6-sebi-categorization-of-mutual-funds-schemes\"><span class=\"ez-toc-section\" id=\"SEBI_Categorization_of_Mutual_Funds_Schemes\"><\/span>SEBI Categorization of Mutual Funds Schemes<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">According to SEBI&#8217;s guidelines from October 2017, mutual funds are grouped into several categories.<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Equity Schemes<\/strong> These funds are mainly invested in stocks. They\u2019re categorised based on the size of the companies they invest in:\n<ul class=\"wp-block-list\">\n<li><strong>Large-Cap Funds<\/strong>: Invest in large, established companies.<\/li>\n\n\n\n<li><strong>Mid-Cap Funds<\/strong>: Focus on medium-sized companies.<\/li>\n\n\n\n<li><strong>Small-Cap Funds<\/strong>: Target smaller, growing companies.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Debt Schemes<\/strong> These funds invest in bonds and other fixed-income securities. They\u2019re classified based on the risk level:\n<ul class=\"wp-block-list\">\n<li><strong>Low-Risk Debt Funds<\/strong>: Invest in safer securities.<\/li>\n\n\n\n<li><strong>Medium-Risk Debt Funds<\/strong>: Mix of safer and higher-yield securities.<\/li>\n\n\n\n<li><strong>High-Risk Debt Funds<\/strong>: Invest in riskier, higher-yield securities.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Hybrid Schemes<\/strong> These funds combine stocks and bonds. They\u2019re split into:\n<ul class=\"wp-block-list\">\n<li><strong>Conservative Hybrid Funds<\/strong>: More focused on bonds, with some investment in stocks.<\/li>\n\n\n\n<li><strong>Balanced Hybrid Funds<\/strong>: Equal mix of stocks and bonds.<\/li>\n\n\n\n<li><strong>Aggressive Hybrid Funds<\/strong>: Higher proportion of stocks compared to bonds.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Solution-Oriented Schemes<\/strong> Designed for specific financial goals:\n<ul class=\"wp-block-list\">\n<li><strong>Retirement Funds<\/strong>: Help you save for retirement.<\/li>\n\n\n\n<li><strong>Children\u2019s Funds<\/strong>: Aim to support your child&#8217;s future needs, like education.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li><strong>Other Schemes<\/strong> This category includes:\n<ul class=\"wp-block-list\">\n<li><strong>Index Funds &amp; ETFs<\/strong>: Track specific stock indices.<\/li>\n\n\n\n<li><strong>Fund of Funds<\/strong>: Invest in other mutual funds instead of directly in stocks or bonds.<\/li>\n<\/ul>\n<\/li>\n<\/ol>\n\n\n\n<p class=\"wp-block-paragraph\">This classification helps investors choose funds that match their financial goals and risk tolerance.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"7-myths-amp-facts-about-mutual-funds-\"><span class=\"ez-toc-section\" id=\"Myths_Facts_about_Mutual_Funds\"><\/span><strong>Myths &amp; Facts about Mutual Funds<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">When it comes to investing, mutual funds are often surrounded by myths and misconceptions. Understanding the truth is highly important.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Myth:<\/strong> Mutual funds are only for experts.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Fact:<\/strong> Mutual funds are designed for everyday investors, even those who aren\u2019t experts. This means you can benefit from expert management without needing to be a financial whiz.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Myth:<\/strong> Mutual funds are just for the long term.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Fact:<\/strong> While many mutual funds are suitable for long-term goals, there are also funds designed for short-term needs. You can choose from various mutual fund types.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Myth:<\/strong> Investing in mutual funds is the same as investing in the stock market or that mutual funds are just equity products.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Fact:<\/strong> Mutual funds invest in a variety of assets, including stocks (equity), bonds (debt), and other securities. They\u2019re not limited to just the stock market.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Myth:<\/strong> You need a large amount of money to invest in mutual funds.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Fact:<\/strong> Many mutual funds allow you to start with a small investment. They are accessible to investors with various budget sizes, so you don\u2019t need a large sum to begin investing.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"8-conclusion\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Mutual funds offer a versatile investment option suitable for various financial goals and risk needs. With options ranging from equity to debt, you can choose the mutual fund type that suits your needs. Despite some drawbacks, the benefits of professional management and diversification often outweigh these concerns. However, you must remember to do proper research before choosing any mutual fund scheme.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"9-faqs-mutual-fund-types\"><span class=\"ez-toc-section\" id=\"FAQs_Mutual_Fund_Types\"><\/span>FAQs| Mutual Fund Types<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<div class=\"schema-faq wp-block-yoast-faq-block\"><div class=\"schema-faq-section\" id=\"faq-question-1725974747946\"><strong class=\"schema-faq-question\"><strong>What are the 4 types of mutual funds?<\/strong><\/strong> <p class=\"schema-faq-answer\">The four main types of mutual funds are equity funds, which invest in stocks; debt funds, which focus on bonds; money market funds, which invest in short-term securities; and hybrid funds, which combine both stocks and bonds.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1725974759313\"><strong class=\"schema-faq-question\"><strong>Which is better: SIP or MF?<\/strong><\/strong> <p class=\"schema-faq-answer\">A systematic Investment Plan is a way of investing in mutual funds. It helps you invest regularly and build wealth over time. Mutual funds are investment products themselves.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1725974759800\"><strong class=\"schema-faq-question\"><strong>Which is the best in mutual funds?<\/strong><\/strong> <p class=\"schema-faq-answer\">The best mutual fund depends on your personal goals and risk tolerance. The popular choices often include equity funds for growth or hybrid funds for a balanced approach.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1725974760209\"><strong class=\"schema-faq-question\"><strong>Can I invest \u20b9500 per month in mutual funds?<\/strong><\/strong> <p class=\"schema-faq-answer\">Yes, you can begin investing in mutual funds with just \u20b9500 per month using a Systematic Investment Plan (SIP).<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1725974793507\"><strong class=\"schema-faq-question\"><strong>Are mutual funds safe?<\/strong><\/strong> <p class=\"schema-faq-answer\">Mutual funds are generally safe but do carry market risks. Diversification and careful selection can help you manage these risks.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1725974794043\"><strong class=\"schema-faq-question\"><strong>Is mutual fund better than FD?<\/strong><\/strong> <p class=\"schema-faq-answer\">Mutual funds can offer higher returns but come with market risks. Fixed Deposits (FDs) on the other hand, provide guaranteed returns with lower risk.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1725974813907\"><strong class=\"schema-faq-question\"><strong>Is mutual fund tax-free?<\/strong><\/strong> <p class=\"schema-faq-answer\">Mutual fund gains are taxable, but funds like Equity Linked Savings Schemes (ELSS) offer tax benefits under Section 80C of the Income Tax Act.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1725974828802\"><strong class=\"schema-faq-question\"><strong>Is mutual fund profitable?<\/strong><\/strong> <p class=\"schema-faq-answer\">Mutual funds can be profitable, especially with long-term investments and careful fund selection, but they are subject to <a href=\"https:\/\/shoonya.com\/blog\/protecting-your-portfolio-during-market-fluctuations\/\" target=\"_blank\" rel=\"noreferrer noopener\"><mark style=\"background-color:rgba(0, 0, 0, 0);color:#d79b30\" class=\"has-inline-color\">market fluctuations<\/mark><\/a>.<\/p> <\/div> <\/div>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Source: <a href=\"https:\/\/www.amfiindia.com\/investor-corner\/knowledge-center\/types-of-mutual-fund-schemes.html\" target=\"_blank\" rel=\"noreferrer noopener nofollow\"><mark style=\"background-color:rgba(0, 0, 0, 0);color:#d79b30\" class=\"has-inline-color\">AMFIndia<\/mark><\/a><\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">______________________________________________________________________________________<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><a href=\"https:\/\/shoonya.com\/\" target=\"_blank\" rel=\"noreferrer noopener\"><mark style=\"background-color:rgba(0, 0, 0, 0);color:#d79b30\" class=\"has-inline-color\">Disclaimer<\/mark><\/a>: Investments in the securities market are subject to market risks; read all the related documents carefully before investing.<\/p>\n\n\n\n<p 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Relying on fixed deposits or gold may feel safe, but it often limits financial growth. The fear of losing hard-earned money can prevent people from exploring better investment options. What if there was a way to invest that offered both safety and &hellip; <a href=\"https:\/\/shoonya.com\/blog\/mutual-funds-everything-you-should-know\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;Everything You Need to Know About Mutual Funds in India&#8221;<\/span><\/a><\/p>\n","protected":false},"author":16,"featured_media":8814,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":"","_members_access_role":[],"_members_access_error":""},"categories":[12],"tags":[5124,5125,5123,5126,5121,4018,200,5122,5120,2346],"class_list":["post-772","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mutual-funds","tag-advantages-of-mutual-funds","tag-disadvantages-of-mutual-funds","tag-everything-about-mutual-funds","tag-how-to-invest-in-mutual-funds","tag-mutual-fund-and-types","tag-mutual-fund-sip-calculator","tag-mutual-funds","tag-mutual-funds-products","tag-mutual-funds-types","tag-types-of-mutual-funds-in-india"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>All About Mutual Funds: Types, Benefits &amp; Risks<\/title>\n<meta name=\"description\" content=\"Learn about mutual funds in India, including basic concepts, types, benefits, and disadvantages. Start small, diversify, and grow your wealth confidently.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/shoonya.com\/blog\/mutual-funds-everything-you-should-know\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"All About Mutual Funds: Types, Benefits &amp; Risks\" \/>\n<meta property=\"og:description\" content=\"Learn about mutual funds in India, including basic concepts, types, benefits, and disadvantages. 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It helps you invest regularly and build wealth over time. Mutual funds are investment products themselves.","inLanguage":"en-US"},"inLanguage":"en-US"},{"@type":"Question","@id":"https:\/\/shoonya.com\/blog\/mutual-funds-everything-you-should-know\/#faq-question-1725974759800","position":3,"url":"https:\/\/shoonya.com\/blog\/mutual-funds-everything-you-should-know\/#faq-question-1725974759800","name":"Which is the best in mutual funds?","answerCount":1,"acceptedAnswer":{"@type":"Answer","text":"The best mutual fund depends on your personal goals and risk tolerance. The popular choices often include equity funds for growth or hybrid funds for a balanced approach.","inLanguage":"en-US"},"inLanguage":"en-US"},{"@type":"Question","@id":"https:\/\/shoonya.com\/blog\/mutual-funds-everything-you-should-know\/#faq-question-1725974760209","position":4,"url":"https:\/\/shoonya.com\/blog\/mutual-funds-everything-you-should-know\/#faq-question-1725974760209","name":"Can I invest \u20b9500 per month in mutual funds?","answerCount":1,"acceptedAnswer":{"@type":"Answer","text":"Yes, you can begin investing in mutual funds with just \u20b9500 per month using a Systematic Investment Plan (SIP).","inLanguage":"en-US"},"inLanguage":"en-US"},{"@type":"Question","@id":"https:\/\/shoonya.com\/blog\/mutual-funds-everything-you-should-know\/#faq-question-1725974793507","position":5,"url":"https:\/\/shoonya.com\/blog\/mutual-funds-everything-you-should-know\/#faq-question-1725974793507","name":"Are mutual funds safe?","answerCount":1,"acceptedAnswer":{"@type":"Answer","text":"Mutual funds are generally safe but do carry market risks. Diversification and careful selection can help you manage these risks.","inLanguage":"en-US"},"inLanguage":"en-US"},{"@type":"Question","@id":"https:\/\/shoonya.com\/blog\/mutual-funds-everything-you-should-know\/#faq-question-1725974794043","position":6,"url":"https:\/\/shoonya.com\/blog\/mutual-funds-everything-you-should-know\/#faq-question-1725974794043","name":"Is mutual fund better than FD?","answerCount":1,"acceptedAnswer":{"@type":"Answer","text":"Mutual funds can offer higher returns but come with market risks. 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