In plain words
What a mutual fund actually is
A mutual fund pools money from thousands of people. A fund manager invests that pool in shares, bonds or both, according to rules written in the scheme document. You own a slice of the pool, counted in units.
The price of one unit is called the NAV (net asset value). It is worked out at the end of every business day from the value of everything the fund holds. When the holdings rise, the NAV rises. When they fall, so does your value. Nothing is fixed in advance, which is the main way a fund differs from a fixed deposit.
You can invest a lump sum once, or a fixed amount every month through a SIP. You can usually take money out on any business day, except in ELSS funds, which have a three-year lock-in.
A worked example
- You invest
- ₹5,000
- NAV that day
- ₹50 per unit
- Units you get
- 100 units
- NAV after some time
- ₹58 per unit
- Your 100 units are worth
- ₹5,800
Figures are made up to show how units work. The NAV can also go below ₹50. Mutual fund investments are subject to market risks, read all scheme related documents carefully.
Category explorer
Nine fund categories, side by side
Tap a category to see what it holds, how bumpy it can get, how long you should plan to stay, and who it usually suits. We talk in categories, not scheme names, until we know your goal.
Large cap funds
Invest at least 80% in the 100 biggest listed companies. These businesses are established, so prices move less sharply than smaller companies, though they still fall in a bad year.
Usually suits: first-time equity investors, and the core of a long-term portfolio.
Flexi cap funds
At least 65% in shares, and the manager is free to move between large, mid and small companies as conditions change. Results depend a lot on the manager's calls.
Usually suits: people who want one diversified equity fund instead of three separate ones.
Mid cap funds
At least 65% in companies ranked 101 to 250 by size. These are growing firms with more room to expand, and more room to disappoint. Falls of 30% or more have happened in weak years.
Usually suits: investors who already hold a large or flexi cap fund and can wait out a rough patch.
Small cap funds
At least 65% in companies beyond the top 250. The swings are the sharpest of any equity category, and selling can be slow when markets panic. A small slice, not the whole plan.
Usually suits: experienced investors with a 10-year horizon who will not stop a SIP after a bad year.
Index funds
Copy a market index such as the top 50 or top 100 companies, in the same weights. No stock picking, so costs are low. You get the market's return, minus a small cost, good years and bad.
Usually suits: people who want low cost and no manager risk for their core equity holding.
Hybrid funds
Hold a mix of shares and bonds in one fund. Some lean towards equity (65% or more), some keep it balanced, some stay mostly in debt. The bond part softens the falls.
Usually suits: first-time investors nervous about pure equity, and goals 3 to 5 years away.
Debt funds
Lend money to the government, banks and companies through bonds and similar papers, and earn interest. Values move with interest rates and the borrower's credit quality. Calmer than equity, but not fixed.
Usually suits: money needed in 1 to 3 years, and the stable part of a long-term plan.
Liquid funds
Invest in very short-term papers that mature within 91 days. Redemption money usually reaches your bank the next business day. A place to park cash, not to grow it.
Usually suits: emergency funds and money you will need within a few weeks or months.
ELSS (tax saving) funds
Equity funds where investments up to ₹1.5 lakh a year qualify for deduction under Section 80C in the old tax regime. Each instalment is locked in for three years from its own date.
Usually suits: salaried people on the old tax regime who want their 80C money in equity. More on ELSS
Risk levels follow the six-step riskometer every scheme must show (low to very high). The level of an individual scheme can differ; always check its own riskometer. Category rules are as per SEBI's scheme categorisation.
How we pick funds for you
Seven checks before a fund goes on your list
Last year's top performer is often next year's average one. So we look at things that hold up over time, and we write down why each fund is there.
Your risk profile
A short set of questions on income, savings, dependants and how you reacted the last time markets fell. This decides your equity and debt split.
The goal it is for
Retirement, a child's college fees, a house down payment. Each goal gets its own funds so you can see progress separately.
Your time horizon
Money needed in two years does not go into a small cap fund. Shorter goals get debt or hybrid; longer goals can carry more equity.
Consistency over years
We compare rolling returns across 3, 5 and 7 year periods against the category and the index, not a single good year.
Expense ratio
The yearly cost charged by the fund. A difference of 0.5% a year adds up over 15 years, so we compare it within the category.
Fund manager track
How long the current manager has run the fund, and how the fund behaved in falling markets under them.
Portfolio overlap
Three funds holding the same 40 shares is one fund paid for three times. We check overlap before adding a fund to what you already own.
How we are paid
Said plainly
We shortlist funds with you, review them every year and handle the KYC and nominee paperwork. Here is who pays for that.
Our disclosure: Vision Wealth is a mutual fund distributor, not an investment adviser. We earn trail commission on regular plans, paid by the fund house out of the expense ratio. We do not charge you a separate fee.
Free portfolio review
Already hold funds? Let us look at them.
Many people end up with six or seven funds picked at different times, with overlapping holdings and no clear goal. Share what you hold and we reply on WhatsApp with what to keep, stop or merge.
SIP calculator
What a monthly SIP could add up to
Move the sliders. The rate is an assumed rate for illustration only; real returns vary year to year and can be negative. For step-up and lumpsum, use the full calculators.
Mutual fund investments are subject to market risks, read all scheme related documents carefully. Past performance may or may not be sustained in future.
From our investors
What people tell us after a year
Shared with permission. Their results are their own and are not a promise of yours.
I had seven funds from different apps and friends' tips. They showed me four of them held mostly the same companies. We merged them into three and I finally know why each one is there.
They told me upfront that the regular plan has a commission in it. That honesty is why I stayed. My SIP is ₹3,000 a month in a hybrid fund to begin with.
When the market fell last year I wanted to stop everything. One call, they showed me my goal was nine years away, and I kept the SIP running. Glad I did.
Simple explanation of large cap versus small cap, no jargon. They moved my daughter's education money out of a small cap fund because we need it in four years.
What is the minimum amount to start?
Most funds accept a SIP from ₹500 a month and a lump sum from ₹1,000 to ₹5,000. We usually suggest starting with what you can keep paying every month without strain, and raising it each year.
Can I lose money in a mutual fund?
Yes. Equity funds can fall 20% to 40% in a bad year, and even debt funds can drop in value. That is why we match the category to how soon you need the money, and why equity is meant for goals five or more years away.
How do I take my money out?
Send a redemption request and the money reaches your registered bank account, usually in one to three business days for equity funds and the next business day for liquid funds. Some funds charge a small exit load if you leave within a year. ELSS units cannot be redeemed for three years.
How are mutual fund gains taxed?
It depends on the category and how long you held the units. Equity funds held over a year are taxed as long-term gains above a yearly exemption limit; shorter holdings are taxed at a higher short-term rate. Debt fund gains are generally added to your income. Tax rules change, so we check the current rules with you during the review.
Do I need a demat account?
No. Mutual fund units can be held in a statement account with the fund's registrar. You only need KYC done once, with PAN, Aadhaar and a bank account in your name.
Not sure which category fits your goal?
Mutual fund investments are subject to market risks, read all scheme related documents carefully. Past performance may or may not be sustained in future.