Exploring Mutual Fund Landscape in India: How it Operates and Generates Returns


The mutual fund industry in India is ready to grow, offering lots of chances to invest. With the expanded middle class, financial literacy is rising. More people are saving and seeking wise investments. Rules are changing, and companies are getting creative. People are getting smarter about investing. There are many types of mutual funds to choose from. Whether you are new to investing or a pro, mutual funds offer something for everyone. 

Let’s look at recent events in India’s mutual fund world and see where it’s heading.

Understanding Mutual Funds

Mutual funds offer a handy way for investors to pool their money. They can then invest in a mix of stocks, bonds, and other securities. Professional fund managers manage them.  They make investment decisions for the investors. Or you can do so yourself using the best website for mutual fund investment.

Mutual funds provide a chance for individuals to access a diversified investment portfolio. They require relatively low investments and are suitable for new and experienced investors seeking growth or income.

Types of Mutual Funds in India 

Mutual funds come in various types, catering to different investment objectives and risk profiles:

  1. Equity Funds: Invest primarily in stocks, aiming for long-term capital appreciation.
  2. Debt Funds: Predominantly invest in fixed-income securities like bonds and government securities, offering regular income with lower risk.
  3. Balanced/Hybrid Funds: Blend stocks and bonds to balance growth potential with income generation.
  4. Index Funds: Mirror the performance of a specific stock market index, aiming to replicate its returns.
  5. Money Market Funds: Invest in short-term, high-quality, low-risk securities, providing stability and liquidity.
  6. Sector Funds: Concentrate investments in sectors such as technology, healthcare, or energy, offering targeted exposure to particular industries.
  7. Tax-Saving Funds (ELSS): Offer tax benefits under Section 80C of the Income Tax Act in India while investing primarily in equities.
  8. Exchange-Traded Funds (ETFs): Trade like stocks on exchanges, tracking specific indices or commodities, offering intraday trading flexibility.
  9. Fund-of-Funds (FoFs): A fund of funds (FOF) is a mutual fund type that invests in other mutual funds or similar investment vehicles rather than directly investing in individual securities.
  10. International Funds: Invest in stocks or bonds of companies outside the investor’s home country, providing exposure to global markets.

Who Regulates Mutual Funds in India?

The Securities and Exchange Board of India (SEBI) regulates mutual funds in India. SEBI is the regulatory body overseeing the securities markets in India, including mutual funds. It formulates policies and regulations to protect the interests of investors, ensure market integrity, and promote the development of the mutual fund industry. 

SEBI thus regulates various aspects of mutual funds, including their registration, operations, disclosure requirements, and investor protection measures.

How to invest in mutual funds

Here’s a simplified guide for anyone looking to start into mutual fund investments, consisting of five straightforward steps:

Step 1: Begin by assessing your risk tolerance through risk profiling, which is crucial for understanding your investment comfort level.

Step 2: Once you’ve identified your risk profile, allocate your funds across different asset classes to create a balanced investment portfolio.

Step 3: Research and identify mutual funds that align with your asset allocation strategy, considering factors like past performance and investment objectives.

Step 4: Select the specific mutual fund scheme you wish to invest in and initiate the application process, whether through online platforms or offline channels.

Step 5: Ensure diversification of your investments and maintain regular monitoring to optimise results and maximise potential profits.

How to invest in Mutual Funds Online 

Understanding how to invest online using the best app to invest in mutual fund is crucial for modern investors. There are two primary methods:

1) Registering on an AMC Website:

Every Asset Management Company (AMC) offers an official website where investors can browse various mutual funds and follow simple instructions to open an account. The KYC process, including e-KYC, is often completed online using an Aadhar Number and PAN. Once verified, investors can start investing seamlessly.

2) Utilising Mobile Applications:

AMCs and third-party mutual fund aggregators offer mobile applications for convenient investing. These apps enable investors to access various mutual fund schemes, view account statements, buy or sell units, and monitor portfolio performance. Investors can easily invest in funds from different AMCs through these platforms.

How Mutual Fund Operates in India 

In India, mutual funds work under the regulatory framework set by the Securities and Exchange Board of India (SEBI). Here’s how they operate:

Fund Creation

Mutual funds are created by asset management companies (AMCs) that establish various mutual fund schemes with specific investment objectives.

Investor Participation

Investors purchase units of mutual fund schemes by investing money and becoming fund shareholders. The amount invested is pooled together with funds from other investors.

Portfolio Management

Professional fund managers appointed by the AMC make investment decisions based on the fund’s objectives. They select and manage a diversified portfolio of securities, such as stocks, bonds, or money market instruments, in line with the fund’s investment strategy.

Asset Allocation

Fund managers allocate assets across different asset classes and securities based on market conditions, risk assessment, and investment objectives.

NAV Calculation

A mutual fund’s Net Asset Value (NAV) is determined each day, indicating the value per unit of the fund’s assets after accounting for its liabilities. The NAV is computed by dividing the total value of assets minus liabilities by the number of outstanding units.

Investor Services

Mutual funds provide various services to investors, including regular updates on fund performance, access to account statements, and assistance with transactions.


Mutual fund units are distributed through various channels, including mutual fund distributors, financial advisors, online platforms, and direct channels offered by the AMC.

Regulatory Compliance

Mutual funds in India are regulated by SEBI, which sets guidelines and regulations to ensure investor protection, transparency, and fairness in operations.

Overall, mutual funds in India offer investors a convenient and professionally managed way to access diversified investment portfolios suited to their financial goals and risk tolerance levels.

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Points to Keep in Mind Before Investing in Mutual Funds

Here are some key points to consider before investing in mutual funds:

  • Define Your Investment Goal: Clarify your financial objectives, whether buying a house, funding education, or planning retirement.
  • Choose the Right Fund: Research a fund that aligns with your investment goals, risk tolerance, and affordability. Seek guidance from a financial advisor if needed.
  • Assess Risk: Understand that each fund carries its level of risk. High-return schemes often involve higher risks, while debt schemes offer more moderate returns with lower risks.
  • Keep KYC Updated: Ensure compliance with KYC requirements by updating your documents, such as PAN card and address proof. Please comply to ensure your ability to invest in mutual funds.


Knowing the types of mutual funds and how mutual funds work in India is essential. Apps make investing more accessible by giving real-time updates, helping set goals, and providing personalised advice. Choosing the best app for mutual fund investment is important because it simplifies investing and enables you to manage your money better. 


1. How often are mutual fund returns calculated?

Mutual fund returns are typically calculated daily based on the fund’s Net Asset Value (NAV), which represents the value of the fund’s assets minus liabilities. Investors can track the performance of their mutual fund investments regularly.

2. How can investors monitor their mutual fund investments?

Ans: Investors can monitor their mutual fund investments through regular account statements provided by the fund house, online platforms, mobile apps, or third-party financial service providers.

  1. What are the costs associated with investing in mutual funds?

Ans: Investors should be aware of costs such as expense ratios, entry and exit loads, and other fees charged by mutual funds, as these can affect overall returns.

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