What are Mutual Funds in India? How to Invest in Mutual Funds?

Mutual funds are investments that pool money from many investors and use it to purchase a variety of securities, such as stocks, bonds, and other investments. The returns from these investments are then shared among the investors.

Mutual funds are managed by professional fund managers who have expertise in selecting investments that have higher returns and lower risk. They also offer diversification, which means that the investor’s money is spread across different asset classes and sectors, reducing their overall risk.

Investing in mutual funds is a popular choice for people who are looking for a simple, low-cost way to diversify their portfolio and access a wide range of investments. It is also suitable for those who don’t have the time or knowledge to manage their investments themselves.

What are Mutual Funds in India?

Mutual funds in India are an investment vehicle that pools the resources of multiple investors to purchase different types of securities such as stocks, bonds, and money market instruments.

They are managed by expert professional investment managers who decide which securities to consider buying, when to buy them, and when to let go of them to make profit out of them. Mutual funds are a popular option for investors who want to diversify their portfolio without having to manage a large sum of money.

In India, the body which regulates the mutual funds is Securities and Exchange Board of India (SEBI), which sets the rules and regulations that govern the industry. The SEBI also regulates the fund managers who are responsible for managing the funds.

Why are Mutual Funds Important?

Mutual funds are an important source of financial inclusion for individuals, in India. People who may have limited access to other investment vehicles. Mutual funds allow those who may not have the expertise or the capital to invest in sophisticated financial instruments to participate in the stock market. Additionally, mutual funds provide diversification, which is important for reducing risk and increasing returns.

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The popularity of mutual funds in India has grown significantly in recent years. As of December 2022, there are mutual fund schemes running in India, with assets under management of more than ₹39.89 trillion rupees. The largest asset management company in India is the State Bank of India, which manages more than 1 trillion rupees in assets.

Additionally, HDFC Mutual Fund, ICICI Prudential Mutual Fund, and SBI Mutual Fund are some of the other major players in the Indian mutual fund industry.


Mutual funds offer several advantages over other forms of investments in India. They are diversified, meaning a single fund can hold many different types of securities, reducing risk by spreading it across a number of different investments. These funds also offer liquidity, meaning investors can withdraw money from the fund whenever they need to without having to wait for the security to be sold.

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This makes them an ideal investment vehicle for those who may need quick access to their money.
They are also professionally managed, meaning investors don’t have to actively manage the fund, leaving that to the fund manager, who is better knowledgeable and experienced in the markets.

Mutual funds are also low-cost, since the fund manager’s fees are typically spread across all of the investors in the fund. This means that even small investors can benefit from the expertise of a professional fund manager without the high cost of investing directly in the stock market.

Some Stats related to Mutual Funds in India

  • Indian Mutual Fund Industry’s AUM was ₹39.89 trillion as of December 31, 2022.
  • AUM grew by 5-fold from ₹7.60 trillion in 2012 and 2-fold from ₹21.27 trillion in 2017.
  • Industry crossed key AUM milestones of ₹10 trillion, ₹20 trillion, and ₹30 trillion in 2014, 2017, and 2020 respectively.
  • The mutual fund industry reached 10 crore folios in May 2021.
  • Total number of accounts (folios) as of December 31, 2022 was 14.11 crore.
  • 11.29 crore folios were in equity, hybrid, and solution-oriented schemes primarily invested in by retail segments.

How to Invest in Mutual Fund?

Investing in mutual funds is an easy way to diversify your portfolio and get a good return on your investments. Mutual funds can be a great way to diversify your investments and get a good return on your money.

But with so many different mutual funds available, it can be difficult to know which ones are right for you. In this article, we’ll cover the basics of mutual fund investing and provide tips on how to get started.

Understand Mutual Funds

Before you begin investing in mutual funds, it’s important to understand how they work. Mutual funds are investment vehicles that pool the money of many investors and invest in a variety of securities, such as stocks, bonds, and money market instruments. The fund’s manager will decide which securities to invest in based on their goals and objectives.

Choose a Fund

Once you’ve decided to invest in mutual funds, the next step is to choose a fund that meets your needs. Start by identifying your investment goals and objectives. Are you looking for long-term growth, income, or a combination of the two? Once you’ve identified your goals, you can research which funds will meet them. Consider factors such as fees, performance, and the fund’s investment strategy.

Determine Your Risk Tolerance

When investing in mutual funds, it’s important to consider your risk tolerance. Different funds have different levels of risk, so it’s important to understand what level of risk you’re comfortable with. Generally, the higher the potential return, the higher the risk. Investing in funds with higher risk can also lead to higher returns, so it’s important to find the right balance for your individual needs.

Set Your Investment Amount

Once you’ve decided which fund to invest in, you’ll need to decide how much to invest. Generally, mutual fund investments start at rupees 500 and can range anywhere between inr 500-5000. However, some funds may require higher minimum investments. Once you’ve determined how much you’d like to invest, you can purchase shares of the fund through a brokerage or through the fund manager directly.

Monitor Your Investment

Once you’ve invested in mutual funds, you’ll need to monitor their performance. Keeping track of your investments can help you stay informed about how your funds are performing and give you an opportunity to make adjustments if needed. Many mutual funds offer online tools that allow you to track the performance of your investments. Investing in mutual funds can be a great way to diversify your portfolio and get a good return on your investments. With a bit of research and understanding of the basics, you can start investing in mutual funds and reach your financial goals.

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What are the benefits of investing in mutual funds?

Mutual funds offer a number of benefits including diversification, liquidity, professional management, and affordability. Diversification helps reduce risk by spreading your investments across different asset classes. Whereas liquidity allows you to access your funds with relative ease. Professional management allows you to benefit from the expertise of experienced fund managers. Also, mutual funds are typically more affordable than other types of investments.

What are the types of mutual funds in India?

The types of mutual funds offered in India include:

  • equity mutual funds
  • debt mutual funds
  • balanced funds
  • index funds
  • tax-saving funds or ELSS
  • exchange-traded funds or ETFs

What are the charges associated with investing in mutual funds?

Mutual funds typically have charges associated with them such as entry/exit load, asset management fees, and transaction costs. Be sure to read the fund’s offer document carefully to understand the fees associated with investing in it.

Is it safe to invest in mutual funds in India?

Mutual funds are relatively safe investments as they are regulated by the Securities and Exchange Board of India (SEBI). However, it is important to understand the risk associated with different funds before investing.


Mutual funds in India are an important option for investors looking to diversify their portfolio and increase their returns. They are regulated by the SEBI and managed by professional fund managers, making them a safe and reliable option for investors. Whether you’re an experienced investor looking to diversify, or a beginner looking to get started investing, mutual funds are a great way to get started.

In conclusion, Mutual Funds in India are an effective way to invest and achieve financial goals in the long run.

Mutual Funds are well-regulated, diversified investments that help to balance risk and reward. With the help of an experienced mutual fund advisor or online mutual fund platform, anyone can easily invest in mutual funds in India. Mutual funds come in different types, with different objectives and risk levels, so investors must be aware of the risks and rewards associated with each type in order to make the right investment decisions.

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Author: Vedanti KiranVedanti is a female finance writer, currently pursuing her studies at Hansraj College. She has a passion for writing and travelling, and her articles on the stock market, finance, investment, and cryptocurrency are well-researched and informative. With her unique perspective on the world of finance, Vedanti is a go-to source for those seeking insights into the world of finance.

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