Types of Mutual Funds in India: Beginner’s Investment Guide

India’s mutual fund industry reached new heights, raising ₹65.74 lakh crore in March 2025. This growth shows how mutual funds are becoming the preferred investment choice for millions of Indians. People now understand that mutual funds offer professional management of their money without requiring deep market knowledge. These investment plans help investors build wealth while professionals guide them through the mutual fund choices.

Previously exclusive to wealthy individuals, mutual funds now offer access to a wide range of investing possibilities for everyone. Additionally, many mutual fund service platforms make investing simple through technology and customer support. So, scroll down to understand the classification of mutual funds, how to pick them, and how to start step by step.

What Are Mutual Funds?

Mutual funds are investment plans that collect the capital of numerous individuals and use it to purchase stocks, bonds, and other securities. Which assets to purchase and how to spend the pooled funds are decisions made by the fund manager. This strategy lowers the likelihood that an investor will lose their money by distributing risk among assets. One can invest once or use a SIP to add money each month over time. Let us discuss the benefits of investing in mutual funds: 

• Liquidity: Investors can obtain cash by redeeming units in the majority of open-ended mutual funds within a day or two.
• Options: To meet the demands of investors, fund firms provide schemes for objectives, time periods, and risk levels.
• Low barrier to entry: SIPs enable investors to start with small amounts and progressively grow them every month.
• Financial discipline: By investing a certain amount at regular intervals, SIPs help consumers form a savings habit.

What Are the Different Types of Mutual Funds in India?

In India, mutual funds are categorized using standards and labels set by the Association of Mutual Funds in India (AMFI) and the Securities and Exchange Board of India (SEBI). To enable consumers to compare choices, they arrange funds according to tenure, investment goal, and asset mix. Let us discuss the types of mutual funds in detail: 

Equity Funds

Equity funds aim to increase capital over time by investing in company shares. Investors who accept value fluctuations in exchange for possible higher returns are well-suited for these funds. Market signals, industry trends, and company performance influence stock selection by fund managers. Equity plans vary by firm size and include large, mid, and small-cap methods. 

Debt Funds

Bonds, government securities, and corporate debt are examples of fixed-income investments made by debt funds. In contrast to equity funds, they seek to protect capital and offer consistent returns. The debt instruments that these funds hold in their portfolios are issued by banks, businesses, or governments. The length, credit quality, and interest rate sensitivity of debt funds impact the overall returns and risk. Investors use these funds to manage cash demands and store money for specific time periods.

Hybrid Funds

Hybrid funds combine stock and debt assets in one portfolio. They incorporate both asset kinds to achieve a mix of growth potential and stability. Conservative hybrid funds have more debt, whereas aggressive ones have more equity. These funds are ideal for investors who want to grow but cannot take on full equity risk. They provide diversity without the need to invest in various funds.

Index Funds and ETFs

Exchange-traded funds (ETFs) and index funds are passive funds, which means they attempt to mirror the performance of a stock market index. Passive funds’ investment portfolios are similar to those of the benchmark index. These mutual funds investment plans are less expensive and suit those investors looking for market exposure. Examples are Nifty50 index funds, which include the same 50 equities and proportions as the Nifty50 index.

Liquid and Ultra-Short Funds

Liquid and ultra-short funds invest in very short-duration products for quick access to money. They typically offer a slightly higher return than a savings account while keeping your money safe. Such funds come in handy for short-term requirements such as emergency payouts, parking excess funds, or salary cycle management.

How To Choose the Right Mutual Fund For Your Goals?

Among the various types of mutual funds, the right choice depends on the investor’s age, income, risk tolerance, and financial goals. Let us discuss important factors for selecting the right investment plan:

• Time Considerations: Short-term requirements fit debt funds, whereas long-term objectives fit equity funds.
• Risk Appetite: Low-risk tolerance works well for debt funds, whereas high risk tolerance permits equity funds.
• Financial Goals: Emergency finances require debt stability, while retirement requires equity growth.
• Age Factor: While elderly investors favor debt security, younger investors can withstand equity volatility.

How To Get Started With Finkeda For Mutual Fund Investments?

Finkeda makes mutual fund investing accessible and convenient. Investors can use Finkeda’s mutual fund service by following these steps:

Step 1: Install the Finkeda Prime app, create a secure PIN, and register with your cell number.

Step 2: To view schemes by kind and risk, select Mutual Funds under the Investments tab.

Step 3: To select the best mutual fund to invest in, apply filters to group funds by risk, duration, or return. 

Step 4: Choose your investment amount and start your SIP, or make a lump sum investment. 

Step 5: Monitor your investments through Finkeda’s user dashboard and mobile app

Invest in a Mutual Fund to Boost Your Portfolio

Equity, debt, hybrid, and solution-oriented mutual fund types are all designed to accommodate varying risk tolerances and objectives. It functions as an approachable plan to get novices started in investing. SEBI oversees these investment strategies to ensure that fund managers manage the market’s complexity and that investors’ interests are safeguarded.

Through customizable SIPs and digital KYC, we make mutual fund investing easy, transparent, and accessible. Investors can easily start with a small sum, stick with it, and adjust the amount over the years. Thus, to get started investing in mutual funds, download the Finkeda Prime App today!