
Equity fund? Exit load? Net asset value? Expense ratio?
Confused by this financial mumbo-jumbo?
We hear you.
Investing can be a daunting task, especially if you are new to the financial world. But it is one of the key assets to have in your kitty if you want to grow your wealth exponentially. So, what if you could invest your savings and have someone else manage them wisely and professionally on your behalf? That’s exactly what mutual funds do.
What are Mutual Funds?
At its core, an Asset Management Company (AMC) pools money from multiple investors with common investment objectives. Financial experts, also known as fund managers, invest this money in a diversified portfolio of assets, like stocks, bonds, or money market instruments. Investing in these securities can create growth opportunities or appreciate the amount for investors. The AMCs charge an annual maintenance fee (expense ratio) to manage individual investments.
Essentially, it allows you to invest in diverse assets without having to pick and manage them individually. Think of it as a road trip with your friends – Everyone pools money to hire an expert driver (fund manager) who decides the best route to take and ensures everyone reaches the destination (investment goals).

The ‘Fun’ in Mutual Funds: Why Should You Invest Here?
As per the Association of Mutual Funds in India, assets under management (AUM) of the Indian mutual fund industry have grown from 10.96 trillion as of October 31, 2014, to 67.26 trillion as of October 31, 2024, witnessing a more than 6-fold increase in 10 years. This showcases an upward trajectory in individuals’ approach to wealth management, making mutual funds a vital investment strategy.
Many people wish to invest in stock markets, but factors like market volatility and their individual risk appetite deter them. Therefore, mutual funds investments are a perfect solution, as they are a well-diversified, cost-effective, and tax-saving way to grow your savings. Here are some compelling reasons to invest in them:
- Diversification: Mutual funds invest in a mix of assets, spreading your risk across different investments. Even if one asset doesn’t do well, others in the portfolio can balance it.
- Affordability: Establish a foundation for long-term investments with Systematic Investment Plans (SIPs) as low as Rs. 500 each month. You can also take the reigns of investing in direct plans to save money on brokerage and commission costs.
- Expert management: These are managed by investment specialists who closely monitor market movements. They pick the right stocks for you and invest them at the right time to yield profitable results.
- Disciplined investment habits: Mutual funds like SIPs encourage regular investing. Investors can set up an auto-debit feature on Stack’D to debit a specified amount from their account.
- Seamless: The world is at your fingertips, and mutual funds investments are no different. Complete your KYC process online, and invest in mutual funds with only one click.
Best Strategies Before Investing in Mutual Funds
- Create a diversified portfolio: To obtain more lucrative returns, have a combination of equity and debt funds in your portfolio.
- Define your financial goals: Be certain about what you want to achieve with your investment. Is it early retirement planning, buying a house, funding your child’s education, or simply wealth creation? Once your goal is defined, you can invest accordingly.
- Consider investing through SIPs: Leverage the Rupee Cost-Averaging method to buy more units when the market is down and fewer units when it is up. Therefore, investing through SIPs is advisable to ride out the market’s erratic periods.
- Buy-and-hold strategy: A good rule of thumb is to look for consistent returns over longer time horizons. This technique involves purchasing investments and holding them for an extended period regardless of whether markets are rising or falling.
- Choose the right mutual fund: Investors need to complete their due diligence before opting for the right mutual fund. This includes risk profiling, analyzing your investment objectives, fund manager’s expertise, and expense ratio.
Mutual funds are a great starting point for beginners looking to grow their wealth over time. With Stack’D, mutual fund investments are simple, smart, and easy. Remember, the key to successful wealth creation is patience and consistency.
Frequently Asked Questions –
1. Do I need to pay tax on mutual funds?
Yes, income tax authorities tax capital gains on mutual funds, as the fund has appreciated since you bought it. However, taxation depends on the type of mutual fund and the holding period.
However, one way around this is to own the funds in tax-advantaged accounts, such as traditional or Roth IRA (Individual Retirement Arrangement). Herein, your funds grow tax-free even when you sell them. However, you will eventually pay taxes when withdrawing from a traditional IRA, whereas Roth IRA withdrawals are tax-free.
2. Can I withdraw mutual funds anytime?
Yes, their flexible nature allows you to redeem your investment anytime before the maturity period. However, certain funds, like the Equity Linked Savings Scheme (ELSS), come with a lock-in period of three years from the investment date.
3. Are mutual funds safer than stocks?
Yes, mutual funds are safer than stocks for various reasons:
- They inherently diversify your portfolio, thereby reducing any risk. They are also managed by investment experts who analyze market trends and make informed decisions. Investing in stocks can be risky unless you are well aware of its nitty-gritty.
- Mutual funds, such as a debt fund, are less volatile, whereas stocks are subject to market fluctuations.
However, mutual funds are not entirely risk-free. For instance, equity mutual funds are subject to similar risks as individual stock investments. Therefore, choose a relevant mutual fund depending on your financial goals, risk tolerance, and time horizon.
Disclaimer: Mutual Funds investments are subject to market risk. Please read all the scheme-related documents carefully.