Mutual funds have become a preferred investment avenue for many beginners in India owing to the multiple benefits they offer. Investing in mutual funds may seem complicated initially with so many schemes to choose from. However, with some basic knowledge about the different types of funds, their risk profiles and the investment process, beginners can easily start investing in mutual funds.
Types of Mutual Funds
There are primarily three types of mutual funds that a beginner can consider investing in:
These funds predominantly invest in stocks of various companies. Based on market capitalization, equity funds can be further categorized into large-cap, mid-cap and small-cap funds. Equity funds tend to be more volatile but generally deliver higher returns over the long term.
Debt funds mostly invest in fixed-income instruments like bonds, government securities, money market instruments etc. They are less risky than equity funds but generate lower returns. Debt funds are more suitable for investors looking for regular income.
Hybrid funds invest in a mix of equities and debt. They aim to balance risk and returns. This makes them ideal for investors new to mutual funds.
How to Invest
Beginners have multiple options to invest in mutual funds:
- Directly with Asset Management Companies (AMCs) – Visit the AMC website or office, fill out application forms and submit documents.
- Online investment platforms – Create an account on platforms like Groww, PayTM Money etc. and invest digitally. Minimal documentation needed.
- Through intermediaries – Approach mutual fund distributors or investment advisors to help select and invest in funds.
Systematic Investment Plan (SIP) allows periodic investments starting from Rs. 500 per month. This is a preferred route for beginners.
Equity funds are suitable for long-term goals while debt funds work for short-term needs. Hybrid funds strike a balance between the two. Beginners should start small, monitor regularly and make adjustments. Seeking expert guidance can further simplify mutual fund investing.