Mutual funds in India, explained

A mutual fund pools money from many investors and invests it in shares, bonds or other assets according to a stated objective. You own units, and the value of each unit (the NAV) is published every business day. SEBI regulates mutual funds and sorts them into categories such as large cap, flexi cap, hybrid and liquid funds.

Both plans hold the same portfolio. A regular plan pays a commission to the distributor out of the fund's expenses, so its expense ratio is higher and its returns are lower by that difference every year. A direct plan is bought straight from the fund house or a direct platform and has no distributor commission.

For equity funds, gains on units held 12 months or less are taxed at 20%, and long-term gains above ₹1.25 lakh a year at 12.5%. Debt funds bought on or after 1 April 2023 are taxed at your slab rate however long you hold them. Our mutual fund tax guide covers the other categories.

A SIP spreads your purchases over time, which suits a monthly salary and reduces the risk of investing everything at a market peak. A lumpsum puts all the money to work at once: it comes out ahead if prices rise after you invest and behind if they fall first. Our SIP vs lumpsum calculator backtests both on real fund NAVs.

No. FinPlann is not a SEBI-registered investment adviser. Where a guide compares funds, it uses published AMFI and fund house data with dates, to show how to judge a category, not to tell you what to buy.