How to Start Investing in Mutual Funds in India 2025

If you’ve been thinking about growing your money but don’t know where to begin, mutual funds can be a great place to start. They are simple, flexible, and perfect for people who don’t have the time or knowledge to invest directly in the stock market.

In this guide, you’ll learn how to start investing in mutual funds in India step by step even if you have no prior experience.

What is a Mutual Fund?

A mutual fund is like a big basket where many people put in their money. That money is then used by professional fund managers to invest in stocks, bonds, or other assets. As the value of those investments grows, your money grows too.

You don’t need to be a finance expert. Mutual funds are designed to help people invest without needing to track the stock market every day.

Step 1: Know Why You’re Investing

Before putting your money into any investment, it’s important to know why you’re doing it. Are you saving for your child’s education? Planning to buy a house? Building a retirement fund?

Knowing your goal will help you decide:

• How long you should stay invested

• How much risk you can handle

• What type of mutual fund will suit you best

If you’re investing for more than five years, equity mutual funds might be a good option. If you need the money in one or two years, you may want to look at debt funds which are more stable.

Step 2: Choose the Right Type of Mutual Fund

There are different types of mutual funds available, and each one is built for different needs.

If you're looking for higher returns and can stay invested for a long time, equity funds (which invest in stocks) might work for you. They come with some risk, but over time they usually give better returns than fixed deposits.

If your goal is short-term and you don’t want to take too much risk, debt funds are safer and invest in fixed-income instruments like government bonds.

There are also hybrid funds that combine both equity and debt to balance risk and return. These are good for those who want to play it safe but still want better returns than a savings account.

Step 3: Decide How You Want to Invest - SIP or Lumpsum

There are two common ways to invest in mutual funds - SIP and lumpsum.

SIP stands for Systematic Investment Plan. This is when you invest a fixed amount every month, like ₹500 or ₹2,000. It’s like a monthly savings plan and works best for salaried individuals.

Lumpsum investment means you invest a large amount in one go. This is usually done when you have extra money from a bonus, gift, or savings.

For most beginners, SIP is a safer and more comfortable way to get started. It helps you build discipline and reduces the risk of investing everything at the wrong time.

Step 4: Complete Your KYC

To invest in mutual funds in India, you must complete KYC, which stands for Know Your Customer. This process is now fully online and usually takes just a few minutes.

You’ll need:

• PAN card

• Aadhaar card linked with your mobile

• A bank account

• A quick selfie or live video (on some platforms)

Once your KYC is done, you can start investing immediately. Most investment apps will guide you through this step during the sign-up process.

Step 5: Choose a Platform to Invest

There are several trusted platforms and apps available today where you can invest in mutual funds. Some of the popular ones are Groww, Zerodha, Upstox etc. You can also invest directly through mutual fund company websites like SBI Mutual Fund, HDFC Mutual Fund, or ICICI Prudential.

These platforms allow you to track your investments, compare different funds, and even pause or change your SIP whenever you want.

For better returns in the long run, try to invest in “Direct Plans” instead of “Regular Plans.” Direct plans have lower fees and give you more of the profit.

Step 6: Select a Mutual Fund Based on Research

Don’t pick a fund just because it gave the highest return last year. That can be risky. Instead, look at how the fund has performed over the past 3 to 5 years. Also, see how stable it is during market ups and downs.

You can use websites like Value Research Online or Moneycontrol to check ratings and reviews. Most apps also show whether the fund is good for beginners or long-term investors.

If you’re still unsure, start with a simple index fund or a balanced fund. These are generally safer and easier to understand.

Step 7: Start Small but Stay Consistent

One of the best things about mutual funds is that you don’t need a lot of money to begin. You can start with as little as ₹100 per month.

The key is to stay consistent. Even if the market goes down, keep your SIP going. Over time, the ups and downs even out, and your investment grows with compounding.

Think of it like planting a tree. You won’t see a lot of growth in the first few months, but after a few years, it will become strong and valuable.

Step 8: Understand the Tax Rules

Mutual funds are taxable, but the rules depend on the type of fund and how long you stay invested.

If you invest in equity mutual funds and hold them for more than one year, your profits above ₹1 lakh will be taxed at 10%. If you sell before one year, you’ll pay 15% tax on the profit.

For debt funds, the profit is added to your income and taxed according to your tax slab. There is no longer an indexation benefit after the new rules came in 2023.

If you invest in ELSS (Equity Linked Savings Scheme), you can save up to ₹1.5 lakh in taxes under Section 80C, but your money will be locked in for three years.

Final Thoughts: Start Now, Learn as You Go

Investing in mutual funds is not as complicated as it may seem. You don’t need to be an expert, and you don’t need a huge amount of money. All you need is the willingness to start and the patience to stay invested.

Here’s a quick recap:

• Know your goal

• Choose the right type of fund

• Start with SIP if you're unsure

• Complete your KYC online

• Use trusted platforms to invest

• Stay consistent, don’t panic

• Learn slowly and improve your plan over time

The earlier you start, the more you benefit from compounding. So don’t wait for the perfect time. The best time to invest is now.

FAQs:

Q1. What is the minimum amount needed to start investing in mutual funds in India?
You can start investing with as little as ₹100 per month through SIP (Systematic Investment Plan), depending on the mutual fund scheme.

Q2. Is KYC necessary to invest in mutual funds?
Yes, completing KYC (Know Your Customer) is mandatory before you can invest in any mutual fund in India. It can be done online in a few minutes.

Q3. Which is better: SIP or lumpsum?
SIP is generally better for beginners as it spreads out your investment over time, reducing risk. Lumpsum works best when markets are low or if you have a large amount to invest at once.

Q4. Are mutual funds safe for beginners?
Yes, mutual funds are regulated by SEBI and offer various types of funds for different risk levels. Beginners can start with low-risk or balanced funds and gradually explore equity funds.

Q5. Can I invest in mutual funds without a demat account?
Yes, a demat account is not required. You can invest directly through AMC websites or trusted mutual fund platforms and apps.

Q6. Are mutual fund returns guaranteed?
No, mutual fund returns are not guaranteed as they depend on market performance. However, they have historically offered better long-term returns than fixed deposits.