A mutual fund pools money from many investors and a fund manager invests it in stocks, bonds, or other assets. When the value rises, your investment grows. When it falls, it shrinks. You own units, not individual stocks.
Types of mutual funds
- Equity funds — invest in stocks. Higher risk, higher return. Best for 5+ years.
- Debt funds — invest in bonds and fixed income. Lower risk, stable returns. Good for 1–3 years.
- Index funds — passively track Nifty 50 or other indices. Lowest cost. Recommended for beginners. Read: what is an index fund.
- ELSS funds — equity funds with Section 80C tax benefit.
Where to buy (always choose Direct plans)
- Groww — simplest for beginners
- Zerodha Coin — great if you also trade stocks
- Kuvera — excellent goal-based planning
First fund to start with
A Nifty 50 index fund. Diversified, low cost, transparent, and with a 20+ year track record. Start with a monthly SIP — read what is a SIP to get started.