How To Invest In Mutual Funds Online? – Beginner’s Guide

What are Mutual Funds?

Let’s take an example if you want to open a restaurant and its set-up cost is too much to bear it alone. You plan to call others with the same objective to help you with their shared amount. This entirely will help make the restaurant set-up build. Now that the restaurant is good to function, the revenue now generated will be shared proportionally among the partners.

This allows partners to invest in an asset that is giving them continuous income. This simply is known to be as  Mutual Funds. The industry of mutual funds started in India in 1963. Since then it has witnessed quite an inflation and benefits in the Indian market. Now, most of the old to young generation find it trustworthy and plan to invest here. 

Many investors tend to buy mutual funds for diversification, liquidity of their income, affordability. This also comes with the disadvantage of high fees charges, less income prediction, no individuality in putting idea which makes it a little not swearing in the market these days.

Mutual funds are planned professionally to let investors buy their choice of shares and further it acts as securities for them. Mutual funds are under the eye of the government which seeks information such as performance, fees charges, securities. 

Types of Mutual Funds and their benefits.

Mutual funds in India is based on four different criteria which are discussed below:

Based on structure

  • Open-ended funds: These type of investment, investors can invest any time they want and is actively managed. It is open throughout without any time period. One can take the money and invest openly and is the best suit to invest if you want liquidity in your funds.
  • Closed-ended funds:  In such funds, the unit is able to purchase only for a certain window of time. Once the unit is purchased one can only sell through the stock exchange. 
  • Interval Funds: This has the feature of open and closed-ended funds, the fund is open for some interval to repurchase.

Based on asset class

  • Equity Funds: These kinds of funds invest mostly in stocks. Thus also termed as high risk and high return funds. 
  • Debt Funds: These funds invest in bonds and bills that have fixed security incomes. They are safe and have fixed returns in hand.
  • Money Market Funds: These investments are usually safe with immediate growth yet moderate returns. In this one can invest in liquid investments like treasury bills, commercial papers. 
  • Balanced or Hybrid Funds: These came into consideration in 2017, this is customized to have investment options in equity and in debt at some time.

Based on investment objectives

  • Growth Funds: Money here is invested in equity stocks, they are risky yet high return kind of funds.
  • Income Funds: This allows investors with regular or continuous income, the money is invested in fixed income like bonds, debentures, etc.
  • Liquid Funds: These funds allow to invest in debt and money market security for the maturity of up to 91 days.
  • Tax-saving funds: This investment allows compensation on the income tax act, yet the system is risky and high returns only if performed well.
  • Capital Protection Funds:  Such kinds of funds allow investment in fixed income and equity markets.
  • Fixed Maturity Funds: Thus by the name the maturity of these funds is either at a particular date or earlier than that and allows investment in debt and money market funds.
  • Pension Funds: These funds are usually the high returns at the time of their retirement, it is the combination of equity and debt funds. Equity gives higher risk and high returns while debt provides stable incomes.

Based on Speciality

  • Sector Funds: This kind of fund allows investment in a particular sector. The return is based on the performance of the sector chosen.
  • Index Funds: This is a kind of trade exchange fund that predicts income through a market index.
  • Funds of Funds: This fund allows to investment in different funds and return depends on performance target. Also known as multi-manager funds.

Mutual Funds Related Regulations In India

The formulation of rules, regulating procedures, and policies implementation come under the Securities and Exchange Board of India(SEBI). Reserve Bank of India(RBI) takes the head of the money matters of the fund program. Thus, the Ministry of Defence regulates and monitors RBI and SEBI. The self-regulating functions are operated by the Association of Mutual Funds(AMF). 

The set up of AMC must have 50% independent directors and a separate board which consists of 50% independent trustees and custodians each. Further, while AMC deals with the finds, trustees hold the custody of assets thus, the balance must be maintained between them. A single mutual fund can float different schemes but they have to be individually approved by the trustees and all offer documents have to be filed with the SEBI.

Companies providing Mutual Funds services

Here is the list of the top 10 mutual funds in India.

  • ICICI Prudential Focused Bluechip Equity Fund
  • Aditya Birla Sun Life Small & Midcap Fund
  • Tata Equity PE Fund
  • HDFC Monthly Income Plan – MTP
  • L&T Tax Advantage Fund
  • SBI Nifty Index Fund
  • Kotak Corporate Bond Fund
  • Canara Robeco Gilt PGS
  • DSP BlackRock Balanced Fund
  • Axis Liquid Fund

Five Easy Steps To Start Investing In Mutual Funds

  1. Risk Profiling, the practice of calculating the risk and the return you will get if you invest in a specific fund. This decision should be taken wisely. 
  2. Asset allocation, after your risk profiling now you can sum up the money you want to invest on the kind of investment you like and the thing is of high returns. 
  3. After choosing one you can watch its last year’s performance and return what works best for you.
  4. Decide on the scheme you might want to invest in and fill the form online or visit the office.
  5. Diversification and regular follow-ups should be taken to ensure smooth running.

Queries related to mutual funds

  • Can cash-out of mutual funds at any time possible?

Ans. Yes, it is possible but only for some specific type of funds that is liquid and does not have any time period.

  • Can Indian invest in overseas mutual funds?

Ans. Yes, not only in India but Indians can invest overseas as well. Read more

  • What is a Systematic Investment Plan(SIP)?

Ans. It is an investment plan wherein one can invest a fixed amount in regular intervals.

  • Do one need a bank account to start a mutual fund?

Ans. Yes, for starting and enrolling for mutual funds one needs to have an account with KYC and proper information.

Now that you know, Mutual funds are governed under the governance of SEBI, Ministry of Finances, and Reserve Bank of India. It is highly safe to put your income and play a safe and fair game with it. The loss factor is negligible and returns can lead you to enjoy your retirement. That’s what your elders must have taught. Well! They are not wrong. Mutual funds provide security to your shares and help shape your future. So, choose wisely, which type of funds you are going to invest in. 


Shivangi Singh
Shivangi Singh

I am currently pursuing my Bachelor's in Aerospace Engineering in my final year at the University of Petroleum and Energy Studies. I like to read books and learn new things that help me in my overall growth. I am a people person and love to know and interact with new people. I also like to visit new places and learn about its culture, food and history.

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