Imagine you have Rs 10,000 cash lying idle in your savings bank account. You want to invest. Opening a Fixed deposit is not a thing for Gen-Z, and the stock market feels like a roller coaster ride of many ups and downs. So, what if there is a middle path to achieve financial freedom, with having experts looking after your investments, tailored to your goals to achieve your “Financial Nirvana”.

Yes, Mutual Funds are the right investment vehicle, where you can park your surplus money and also enjoy returns that will outpace the inflation rate.

Understanding Mutual Funds:

A Mutual fund is a financial product that pools the money of the investors. Fund Manager takes that money and invests it in a diversified portfolio of stocks, gold, bonds, or even the international market, depending on the objectives of the Fund. So, it provides an opportunity with lower risk instead of putting all your eggs in one basket (say, just one stock), your money gets spread across many. Each investor holds units of the fund, representing their proportionate share of the fund’s holdings. The value of these units is determined by the Net Asset Value (NAV), which fluctuates based on the performance of the underlying securities.

Types of Mutual Funds: Finding Your Investment Match

Are Mutual Funds Risky?

Yes, market fluctuations can affect your mutual fund’s value. However, when you invest with a long-term perspective, mutual funds have historically outperformed traditional options like fixed deposits and savings accounts. Patience and planning are key.

Smart Tips Before You Invest

• Define Your Financial Goal: Are you saving for a car in 3 years or planning for retirement in 20 years? Your goal will determine the type of fund you need. It could be Equity, Debt, or Hybrid.
• Check Fund Ratings: Use trusted platforms to assess fund performance and credibility.
• Avoid Panic Selling: Markets are volatile in the short term. Stay invested for the long run to ride out the ups and downs.
• Start a SIP (Systematic Investment Plan): A disciplined approach that averages out market highs and lows — perfect for consistent, stress-free investing.
• Don’t Chase Last Year’s Stars: Instead of focusing on last year’s top performers, look for funds with steady returns over 5–10 years.
• Know Your Fund Type:
  • Small Cap Funds = High risk, high reward
  • Mid-Cap Funds = Average risk and average returns
  • Liquid Funds = Low risk, ideal for short-term goals or parking idle cash
• Watch the Expense Ratio: This is the fee charged by the fund house. A lower expense ratio means more returns in your pocket.
• Choose Direct Plans: Direct plans may offer higher returns. However, it could be risky without proper research and guidance, so choose wisely.
• Upgrade Your SIP Over Time: Got a salary hike? Use the SIP Top-Up feature to automatically increase your investment each year. It’s like giving your future a raise!
• Emergency Fund Comes First: Before investing, set aside 5–6 months of expenses in a liquid fund or savings account. It acts as a safety net during unexpected situations.

Final Word: Are Mutual Funds Really “Sahi”?

Absolutely — but only when selected wisely. Mutual funds are among the most efficient tools for long-term wealth generation. They’re not get-rich-quick schemes but disciplined vehicles for financial growth.

Let your mutual fund be your co-pilot — helping your money grow quietly while you sleep.

Vikas Garg
Assistant Manager
Centre for Content Creation (CCC)
National Institute of Securities Markets (NISM)