Understanding Mutual Funds: A Plain-Language Guide for Indian Investors

By
Hemant Beniwal
-
106

Last Updated on April 14, 2026 by teamtfl

A friend once told me: “I keep hearing about mutual funds but I do not really understand what I am actually investing in. It feels like giving money to someone and hoping for the best.”

He is a VP at a Fortune 500 company. He manages teams of 200 people. And he did not understand mutual funds.

He is not unusual. Most Indians who invest in mutual funds do so without clearly understanding the structure. This matters — because you manage risk better when you understand what you own.

⚡ Quick Answer

A mutual fund pools money from thousands of investors and invests it in a diversified portfolio of stocks, bonds, or other securities, managed by a professional fund manager. You own units of the fund — each unit represents a proportional share of the entire portfolio. The value of your units changes daily based on the NAV (Net Asset Value). SEBI regulates all mutual funds in India. This post explains the complete structure — in plain language.

The Outsourcing Analogy

Think of a mutual fund as an outsourcing arrangement. You and thousands of other investors give your money to a professional fund management team. They pool it together and manage it as a single large portfolio.

The advantages of pooling are significant. Individually, Rs 10,000 cannot buy even one share of some quality companies. Pooled with thousands of other investors, Rs 10,000 buys proportional exposure to a portfolio of 50-100 companies. Diversification that was previously available only to wealthy investors is now accessible to anyone.

In return for this service, the fund charges an expense ratio — typically 0.5% to 2% per year depending on the fund type and whether you use a direct or regular plan.

How the Structure Works

An Asset Management Company (AMC) — like HDFC Mutual Fund, SBI Mutual Fund, or Mirae Asset — launches and manages mutual fund schemes. SEBI (Securities and Exchange Board of India) regulates all AMCs and funds.

When you invest Rs 10,000 in a mutual fund, you are allocated units at the current NAV (Net Asset Value). If the NAV is Rs 50, you receive 200 units. As the underlying portfolio grows, the NAV increases — if it reaches Rs 60, your 200 units are now worth Rs 12,000.

The fund manager invests the pooled money according to the fund’s stated mandate. An equity fund invests in stocks. A debt fund invests in bonds. A hybrid fund invests in both.

SEBI’s 36 Categories — What You Actually Need to Know

After SEBI’s 2017 categorisation circular, there are 36 defined mutual fund categories. For most investors, you only need to understand 6-8.

Large Cap Funds: Invest in the top 100 companies by market capitalisation. More stable, lower return potential than mid and small caps. Core of most portfolios.

Mid Cap Funds: Invest in companies ranked 101-250 by market cap. Higher growth potential, higher volatility.

Small Cap Funds: Companies ranked 251 and below. Highest growth potential, highest risk. Not appropriate as a core holding for most investors.

Flexi Cap / Multi Cap Funds: Can invest across large, mid, and small caps. Fund manager decides allocation. Good all-weather option.

ELSS (Equity Linked Savings Scheme): Equity fund with 3-year lock-in and Section 80C tax benefit. Best way to invest for tax saving with wealth creation potential. Learn more about ELSS funds and how they compare to other 80C options.

Debt Funds: Invest in government securities, corporate bonds, money market instruments. Lower risk, more stable returns. Suitable for short to medium-term goals.

Balanced/Hybrid Funds: Mix of equity and debt. Aggressive hybrid (65-80% equity) for long-term goals with slightly lower volatility. Conservative hybrid for capital preservation with some growth.

Not sure which mutual fund category is right for your goal?

A fee-only advisor matches your goals, risk profile, and time horizon to the right fund structure — without any conflict of interest.

Talk to a RetireWise Advisor

Direct vs Regular: The Difference Nobody Tells You About Upfront

When you invest in a mutual fund, you can choose between two plans: Direct and Regular.

Regular plan: You invest through a distributor or agent. The fund pays the distributor a commission from the fund’s assets. This commission shows up as a higher expense ratio — typically 0.5-1% more than the direct plan.

Direct plan: You invest directly with the AMC or through a SEBI-registered advisor. No distributor commission. Lower expense ratio. Higher NAV over time.

The difference sounds small. Over 20 years, it compounds dramatically. On a Rs 1 crore corpus, 0.75% more in annual charges means approximately Rs 35-40 lakh less at maturity. That is real money.

If you have investments in regular plans with no ongoing advice, consider switching to direct plans. The process is simple and the long-term benefit is significant. A complete guide to types of mutual funds in India can help you understand which categories suit different goals.

SIP: The Simplest Way to Invest Regularly

A SIP (Systematic Investment Plan) is simply an automated instruction to invest a fixed amount in a mutual fund on a specific date every month. It is not a separate product — it is an investment mode.

SIPs work because they enforce the habit of investing regularly, they average out your purchase cost over market cycles (rupee cost averaging), and they remove the need to time the market. A Rs 10,000 SIP in a diversified equity fund started at age 30 and maintained until 60 — at 12% CAGR — builds approximately Rs 3.5 crore.

The magic is not the SIP. It is the discipline of not stopping the SIP when markets fall.

What Mutual Funds Are Not

They are not guaranteed. Every mutual fund carries market risk. Your investment can fall in value — sometimes significantly, over extended periods.

They are not the same as fixed deposits. They do not offer guaranteed returns. The NAV on the day you redeem is what you get — not a promised maturity value.

They are not get-rich-quick instruments. The wealth creation potential is real — but it requires time, discipline, and the willingness to stay invested through market volatility.

Frequently Asked Questions on Mutual Funds

Is it safe to invest in mutual funds in India?

Mutual funds are regulated by SEBI and the underlying assets are held in a separate trust — the AMC cannot use investor money for its own purposes. This structural protection means mutual fund investors are protected from AMC insolvency. However, the investments themselves carry market risk — equity funds can lose value in market downturns. “Safe” in mutual funds means structurally protected, not return-guaranteed. Debt funds carry credit risk and interest rate risk. Equity funds carry market risk. Understanding which type you own is the first step to managing it.

What is the minimum amount to start investing in mutual funds?

Most equity mutual funds allow SIPs starting at Rs 100-500 per month and lump sum investments from Rs 500-1,000. ELSS funds typically start at Rs 500. There is no upper limit. The low minimum makes mutual funds genuinely accessible — a 22-year-old starting work can begin with Rs 500 per month and build the discipline that matters far more than the amount.

What is the difference between NAV and market price for mutual funds?

NAV (Net Asset Value) is the per-unit value of the mutual fund — calculated daily by dividing the total value of all assets in the fund by the number of units outstanding. Unlike stocks, mutual fund units are not traded on an exchange — you buy and sell directly from the AMC at the day’s NAV. A higher NAV does not mean a fund is expensive; it simply means the fund has been running longer or has performed better. A fund with NAV Rs 500 is not more expensive than one with NAV Rs 10.

How are mutual fund returns taxed in India?

For equity mutual funds: gains on units held less than 12 months are taxed as Short Term Capital Gains (STCG) at 20%. Gains on units held more than 12 months are Long Term Capital Gains (LTCG) — gains up to Rs 1.25 lakh per year are exempt; gains above this are taxed at 12.5%. For debt funds: all gains (regardless of holding period) are now added to income and taxed at your slab rate. ELSS funds follow equity taxation with the 3-year lock-in ensuring all gains qualify as LTCG.

Understanding what you own is the foundation of good investing. You do not need to know everything. You need to know enough to make good decisions and ask the right questions. Mutual funds, understood properly, are one of the most powerful wealth-building tools available to Indian investors.

Simplicity is underrated in finance. A diversified equity mutual fund, held for 20 years through a SIP, is simpler than most strategies — and better than almost all of them.

💬 Your Turn

What was the one thing about mutual funds that confused you the longest? Or what is still unclear? Ask in the comments — a simple question might help dozens of other investors who have the same doubt but never asked.

106 COMMENTS

  1. Sir.,
    Hi could you please a give a look to the SIP’s i have set up for now via FundsIndia

    1.L&T Midcap Fund-Reg(G)-1000INR
    2.HDFC Balanced Fund(G)-1000INR
    3.Reliance Small Cap Fund(G)-1000INR
    4.Kotak Select Focus Fund(G)-1500INR
    5.DSPBR Small & Mid Cap Fund-Reg(G)-1500INR

    Flexi SIP
    1.L&T Emerging Businesses Fund-Reg(G)-1000INR

    Sir the amount i have mentioned here is the min amount to set up the plan.I planning to invest accordingly to monthly savings as an add.Investement to all MF’s.
    I am planning for 15-20 years .

    so please suggest me that to change any plan or current amount .
    my goal is to wealth creation.

    Regards
    Viva.

  3. Hello hemant sir
    I haven’t invested any amount in mf , as i am a beginner , pls suggest where should I invest ??? I want to invest inr 1000 through sip .

  4. Hi,

    Very informative and brief article on Mutual Funds. At the age of 43, I have now shifted my investments to MFs. Better late than never. 🙂

  7. Dear Sir,

    I had started these investment 3 years back through SIP. I have a son and I want to accumulate money for my retirement and My son education. Iam 37 yr old and a 5laks per annum earning . My monthly expenses are around 14000/-

    IN PPF i have around 1,20000 and Rs 8lakhs are in FDs of bank.

    What should I do to accumulate 60 lakhs for my retirement at 50 and 25 laks for my son education after 20 years from now.

    Kindly give your direction & guidance is there any correction required.

    HDFC TOP 200 (G) :- 2000/-
    HDFC Equity (G) :- 2000/-
    ICICI PRU dynamic (G) :- 2000/-
    ICICI PRU FOcused bluchip (G) :- 2000/-

    Regards,
    Munish K. Singh

  8. Respected Hemant Sir.
    I don’t have any words to congratulate you.You are doing extraordinary social work.I am a biggest fan of your articles.I am really passinate about equity & equity related instruments.since January 2011 ,I have been investing Rs.1000/-each fund through SIP.These funds are, Equity opp.fund,Reliance Gold savings fund,Reliance Banking fund,FT PE ratio fund of funds,Hdfc prudence fund. I have recently started new Rs.1000/-SIP in BSL Banking & financial sector fund & UTI banking sector fund .Apart from that I am planning to invest Rs.1000/- each in 2 new schemes.i.e.Quantum Gold ETF fund & Quanturm Long term equity fund .
    . I have 50 shares of ITC & would like to add 50 shares in each year till 2018.Currently I am analysing Westlife development companies shares & want to invest 50k for long term.Is this good decision? I am 31 years old unmarried person.My goal is long term ( 20 years)
    . I have traditional money back policy of LIC ( Rs.2500/-yearly premium) , Bajaj allianz ULIP ( unit gain yearly premium 12000/-) & yearly ₹ 20000/- contribution in PPF account since Jan.2013.
    . My biggest mistake, I dont have any exposure in Term plan & physical Gold.

    Respected Sir , Can you please guide me ? Is My current investment portfolio up to date.?

  9. Hemant, I am one of your newest reader and have just turned forty. Some say men get naughty at forty but i’ll rather be not naughty with finance, can you suggest some of your earlier or new write up on fin-steps at forty to be taken by a family person especially if he becomes wise of late than never .

  10. Hi Hemant,

    I am 31 yrs old and having following SIP enrolled.

    1. AXIS LONG TERM EQUITY-G – Rs. 2000 for Tax Benefit (required after 15 years for Child higher Education)
    2. HDFC EQUITY-D – Rs. 2000 for childs Marriage. (required after 23 years)
    3. TATA Retirement Savings fund – Progressive Growth – Rs. 2000 for retirement .

    Kindly advise your comments and also advise how much amount would be accumulated at the end of given period considering past performance so as to get rough idea if investments are in right direction.

    Thanks, Nikhil

  12. Dear Hemant,

    For a long time, I have not read your new article, are you busy with other things??

    Your article always happens to be an eye opening article, but it has been many months since I have received your new post.

    Pls. continue to educate us.

    Regards

    Niraj K. Jha

  14. Hi Hemant,
    I have 5 different SIPs in which i invest Rs.1000 monthly. The SIPs are listed below:

    HDFC Top 200 Fund – Growth
    HSBC Tax Saver Equity Fund – Growth
    ICICI Prudential Dynamic Plan – Growth
    Reliance Regular Savings Fund – Equity – Growth
    Sundaram Select Midcap – Growth

    My aim is to create a good corpus in coming fifteen years for my child’s education. Currently, i have these five SIPs and is thinking of starting a few more. Please suggest if i have to discontinue any of these and recommend some new SIP. Apart from these i have two insurance policies LIC Jeevan Saral and Reliance Money Back for premium Rs 20000 each.
    I have to take a insurance for my son i.e. child’s plan. Please suggest me an Insurance company as i m really confused. I have thought of taking 2 insurance of Rs 10000 each one of ING Vysya child protection plan and second of Kotak Child plan. Please reply.
    Tahseen Khan

  15. Hi Hemant,

    Let me first thank for all your financial advices which I have been following from a long time.

    I am 22,and I have just begun my career.I have already invested in the following for a period of 5 years.(SIP)

    ICICI prudential focussed bluechip equity(Large Cap)-40%
    IDFC Premier equity fund(Mid and Small Cap)-35%
    SBI Gold fund-25%

    I further want to increase my investment.Are they the right choices to go on with.If not,please suggest me the others.

    Regards,
    Amit

  17. Hi Hemant/Anil,
    I have read out your all articles.They are really great.
    Could you guide me in the following portfolio.

    I have SIP of 18k in the following funds in growth option.
    My Tenure will be 10 years. current age 30 years. No resposibilities expect child education.

    Large cap: (7.5k)
    HDFC top 200 : 2k
    DSP BR top 100 equity Reg (G) : 5.5k

    Mid cap (8.5k)
    Reliance equity Opp. : 1.5k
    HDFC mid cap opp. : 2k
    BSL Dividend plus : 3k
    icic pru discovery : 2k

    ELSS (2k)
    HDFC tax saver : 1k
    SBI magnum taxgain : 1k

    I want to know is it right porfolio combination for expected 15% return.
    Or i have to decrease the exposure to Mid cap funds.

  18. Hi,
    I have started SIP in below mentioned funds Rs.2500pm.
    HDFC MID-CAP OPPORTUNITIES FUND – GROWTH OPTION
    UTI OPPORTUNITIES FUND – GROWTH PLAN

    I have a HDFC life insurance ULIP plan Rs. 2500pm which invest 50% each in below mentioned funds.

    1. HDFC Group Life ULIP – Option A – Non Superannuation – Balanced Managed Fund.
    2. HDFC Group Pension ULIP – Option B – Superannuation – Growth Fund

    I have a option to changes these funds from my policy control panel.

    Can you please advice if they are good or any suggestions? for next 5 to 10 yr investment.

    Kind Regards,
    Veer

  19. Hi Hemant,

    Thanks a lot for your financial guidance and newsletter. I am 24 year old and working as a energy consultant in private organization at Mumbai. I am very much interested to invest in SIP but still confused about which plan should opt for. I am getting monthly salary of 30,000 in hand in that i am planning to start with 2000 per month and slowly increase my investment in SIP for next 15 to 20 years. Since i am first time investor in SIP, i am having few queries related to this;

    Kindly suggest me which plan i should start with . Looking forward your suggestion.

    • Sakthi,

      Since you are a first time investor a balanced funds will be a good choice since it has both a mix of equity and debt. Along with good downside protection it has in the past delivered returns at par, sometimes more, with diversified funds.

  20. sir i have the following mutual fund investment:
    all sips-
    birla mnc -1000,hdfc midcap-2000,sbi emerging bussiness-2000
    icici fmcg -1000,sbi fmcg-1000,reliance banking -2000
    can robecoinfrastructure-3000
    icici focc bluchip-2000, uti opp -2000
    icici tax saver-3000,hdfc tax saver-3000

    please analyse my portfolio and give your valuble comments… i am expecting 15% returns in 15 years.

  22. Hi Hemanth,

    I have not invested anything till now, I had only EPF account which can save Rs. 24,000/- per year. Now my salaray is 20,000/- after deduction.

    I want to save or invest Rs. 10, 000/- per month as I want to invest for education and future of my 12 years old child. Please suggest.

    • Anuradha,

      That’s almost 50% of your income going towards your child planning. This may be too high considering you would have other goals to meet. In my view you should first identify your exact requirement i.e. how much you need for meeting your child various expenses and then plan to invest accordingly. Also, you do not have enough horizon for your child education so your risk taking in your investments need to be planned considering this. You can plan to invest in equity, debt mutual funds and PPF for meeting education or marriage requirement. The exposure in these assets can be decided based on the investing horizon.
      Read below to now how to plan for your child:
      https://www.retirewise.in/2011/07/child-future-plan.html

  23. Hi Hemant,

    I have been reading your articles for quite sometime.. and first time in my life i am thinking of investing in Mutual funds. i was one among the people who were thinking MF’s are risky and now i am understanding everything better. I have a couple of RD’s and I cannot overdo anything now. But I am planning to start a SIP for 5000 per month. Can you please suggest which will be the good option and whom should I approach to start one? I am 30 years old and have a 3 years old kid. Also sorry if I am making you to repeat.

  24. Very useful info.
    Would suggest if the dates are also displayed with the main article / post – just to know the ageing of the article / queries / comments. A suggestion / recomedation given today might not be valid a few months down the line. Readers can benefit with this.
    OR pls help me in case am not reading the posts / article correctly.

    br.

  25. Hi Hemant,
    I am 24 yrs old.I have started my SIP in HDFC Top 200(2000rs) and DSP BR Top 100(2000), three months back. Now I want to start a new sip in a balanced fund.Should I select HDFC Balance Fund or not.

    Please advice.

  26. I bought two childrens policy from Reliance and SBI in 2009. But NAV is not encouraging. What would be the scenario after 16 years. I invest Rs. 15,000/- and Rs. 12,000/- each.

    I also bought MF of ICICI Prudential Discovery Growth, TATA Capital Builder, SBI Magnum TAX Gain and UTI. None of them are showing encouraging NAV what do I do?

  28. Hi Hemant,

    tfl guide is really wonderful and work as investment Wikipedia for me. I would like to get the information, which can help the small investors, whose savings are very limited, and for people who are not aware of equities and mutual funds, but still want to make investments from their small savings for their children or retirement.
    I think it will be helpful for every common man.
    Expecting the reply.
    Thanks in advance.

    • Thanks Vishal.
      But mutual funds or for that matter most of the investments don’t discriminate between investors. A small investor with Rs 100 monthly savings can start SIP & even a person with 1 lakh per month saving can start SIP. Think.

  30. hi hament ,
    i have read your artical about child future , but i really do’nt know about to make a private trust.
    second thing, i have an SBI ULIP OF 300000/
    I have an max MAX NEW YORK ULIP POLICY of 25000/ yearly
    i have 200000/ of fix deposite
    and my instolment for land with 90000/ monthly with loan till oct 2012.
    and i have a madical insurance for family of 15000/ yr from icici prud
    Hemant suggest me , what can i do for my child future and for retirement plan
    my age is 29

    • Hi Pradeep,
      It looks you have good income & afford some professional to guide you. You can reach a certified financial planner – he can help you in planning your finances & also guide you in building trust. If trust is the only requirement you can also get in touch with some CA or attorney.

  31. mr.hemant,
    tfl is becoming a movement on its own like anti corruption movement whihc sweeped india. you are doing a wonderful job in educating the masses. keep up this fantastic job.
    rajesh

  34. I have SBI Magnum tax saving and investing Rs 1000 everymonth through SIP, can you pls tell me hows is the SBI Magnum , should i carry on or move to some other Mutual fund, also how is LIC Endowment plus ULIP ?

    • Hi Ankur,
      SBI Magnum is a good fund but it will only solve the purpose of claiming tax deductions at the end of year when you are filing tax.I think you should carry if your purpose is only of tax deductions.
      I will suggest you to not mix your investment with insurance, in case of ULIP agents are able to get a huge commission & the risk is only with the insured not the insurer that’s the reason why agents are selling most of the ULIP’s product.

  35. Hi Hemant,
    First Point: First time i read your article and was impressed on your elaboration and holistic approach given to the same. Thank You!!!

    Second Point: I am 27 years of age and running foll SIP. Kindly suggest on long term perceptive of achieving multiple crores as savings.
    1) Reliance Growth Fund (G) – 1000 (3 Yrs)
    2) Reliance Equity Opps. (G) – 1000 (3 Yrs)
    3) Reliance Regular Savings Fund (G) – 1000 (2 Yrs)
    4) ICICI Pru. Dynamic Plan (G) – 1500 (3 Yrs)
    5) SBI Magnum Sec. Umberlla (DR) – 1000 (3 Yrs)
    6) Bharti AXA ULIP – 2500 (2 Yrs)
    7) SBI Gold Fund – 1500 (New)
    8) Bajaj Alliaz ULIP – 10000 / Annum

    Request your suggestion on the above.

    Thank you in advance!!!

    • Hi Hari
      You have invested in three funds of Reliance mutual. The performance of only one of these funds is satisfactory. It appears that you have not been tracking your funds. Moreover having so many funds of a fund house makes your portfolio risky.
      Insurance and investment should never be mixed. Investing in two ULIPs is a bad idea.
      It appears that you have not read Hemant’s post on SBI Gold Fund before investing.
      For constructing a good portfolio of diversified equity funds read the post- Best Mutual Fund For SIP.

  36. excellent information..you are doing good job…i am not much aware of investment and insure… but with your articles i am getting lot of knowledge.

    Thanks.
    Kishore

  37. Hi,
    Hemmant, I read your articles it is too good to educate everyone who dont know how to invest, now i want some comments about my investment please reply me,
    1. LIC ( Yearly Investment 50k last 10 years)
    2. HDFC SL Crest ( Yearly Investment 50k last 1 year )
    3. SIP ( HDFC Top 200,HDFC Equity – G, UTI Dividend Yeild – G, IDFC Premeir Equity Plan – A ( G ), Birla sunlife Frontline equity plan – A ( G )
    Each SIP is 2000/- Rs. per Month ( 120000/- Rs. yearly last 1 year)

    I am waiting for your reply. Thanks for your nice guidance.

    • Hi Shah Nitin,
      I will like to say that your insurance policies are mixture of both insurance & investment, which should not be done. As it’s not mentioned clearly about you LIC policy I can’t say much about it.
      HDFC SL Crest is Highest NAV guaranteed fund – which was understood by investors as Highest Return guaranteed fund. Once the earlier products expired, IRDA did not approve any new product based on the highest NAV. The insurance regulator is not comfortable with the way these products are being pitched to customers. Problem is – these products are not expected to do as well as simple equity oriented schemes, since insurers tend to invest substantial amounts in debt. I will like to suggest you that you should buy online term plans. My suggestion is go & sit with your agent and discuss this and I think you have purchased these policies for tax exemptions which is not the good decision.
      Regarding you SIP’s I would like to suggest that you should continue your SIP’s for long term as the return generated in the longer term will benefit you and will fulfill the goals of yours in future if it so .

  38. Hemant,
    This is a very good article and it should be read by all the people who thinks that LIC Policies are better and safe investments than MFs. In my own experience people who is ready to put in the money into MFs think that MF offered by SBI or LIC are safe since they are owned by Govt. I mean there is a lot of things that need to be done to educate every investors. Really appreciate your effort on this.

  39. Hi Hemant,

    I would like your suggestion regarding my investment. I have started SIP in HDFC Top 200 and DSPBR Top 100 Equity both growth option for 1000 monthly. I am about to go for another schemes as HDFC Equity and IDFC Premier Equity again 1000 per month each. Is it ok or can i add Franklin India Bluechip for 1000 per month to this? I also have a some stock and buy some Blue Chip stocks every month through SIP (stock not MF) approximately 1000-1500 per month. Please suggest if i am on the right track for long term (10-15 years). I will also take buy term insurance with riders in next 3-4 months for 70-90 lakhs.

    • Hi Deelip
      All the funds selected by you are good.Since you are already invested in HDFC Top 200 you can select multicap fund of some other fund house instead of HDFC Equity. Your choice of Franklin India Bluechip is fine.

  41. Hi Hemant, I am a regular reader of your articles. I must say , you are doing a great job.Though am late beginner in all these, and trying to literates my self a bit MFs etc. Also, am a late beginner with SIP, am at age of 35 now, Can you please suggest me in which SIP (Balanced portfolio) should I invest and for how much year (15 or 20yr)? My earning allows me to invest 10,ooo per month. Apart from this am investing 70,000 is PPF, 15000 in LIC and 30000 in HDFC (unit linked Endowment plusII), 20000 in IDFC bonds. Also to know better ,my EMI for home loan is 21000 per month. One more thing I dont want to work after 50 yrs.

    Your suggestion will definitely help me to make my financial strong even after my early retirement.

    Awaiting eagerly for your kind response with valuable suggestion .

    Regards

    Seema

    • Hi Seema
      Since your age is 35years and you don’t want to work after 50 years the duration of your SIPs will be 15 years.
      As you can invest Rs 10000 per month, you can have four to five funds for monthly SIP.You can consider large cap and large and midcap funds of different fund houses with good present and past performance.After investing keep tracking the performance of your funds on regular basis.

  42. HI! Hemant,

    These are my invesment details of SIP of 5 yrs started from Jan2011

    HDFC TOP 200 –>> 2000/month
    IDFC Premier Equity Plan a (G) –>> 2000/month
    ICICI Pru Focused Blue CHip Equity Plan (G) –>> 1000/month
    DSPBR Top 100 Eqt Inst-G –>> 1000/month

    Just need your opinion is it good folio to make the good money at the time of retirement

    Regards,
    Munish K. Singh

  43. Hi Hemant,

    I have started some investment in SIPs for 15-20 yrs term and would request your inputs if it is in the right direction. I have 4 yrs old daughter and want to have sufficient amount for her studies, marriage and for my retirement.
    SIPs:
    BIRLA SunLife-Mid Cap Fund Plan A (G) – 1000, since No. 2009
    Fidelity-Tax Advantage ELSS (G) – 1000, since No. 2009
    HDFC Top 200 Fund (G) – 2000, since No. 2009
    FRANKLIN – BlueChip Fund (G) – 2000, since No. 2009
    FRANKLIN – India Tax Shield – 2000, since No. 2009
    HDFC Tax Saver (G) – 2000, since No. 2009
    DSP Black Rock – Tax Saver Fund (G) – Mar 08 to Feb 09, – 2000. (its is been stopped).
    Lumpsum invested in :
    SBI Magnum TAX Gain (D) – Rs 30000 in 2006
    Fidelity TAX Advantage – 50000 in 2006

    Besides this also investing appx 24000 annually in PPF since 2009 which I would continue for atleast 15 yrs.

    Please suggest what what appx corpus I can expect from above investment in 15 yrs.
    Looking for investing 5000 more in SIPs. Also not sure if withdraw or continue in lumpsum investments.

    I would appreciate if you can share your inputs and suggest.

    Thanks

  44. Hi Hemant, I am a regular reader of your articles. I must say , you are doing a great job.Though I am a beginner in all these, and trying to literates my self a bit MFs etc. I have already did many mistakes by investing in KV and banks FDs.
    I have a 9 months old babygirl and I want to save for her education and marriage.
    Please take some time and guide me.Here is what I have already invested.
    1. INR 4 LAKHS Kissan vikas patra.( IN 2010 Oct.)
    2. 1 LAKHS IN BANK FDS (- do-)
    3.5000 monthly through SIP ( ICICI PRUDENTIAL FOCUSED BLUE CHIP) FOR 3 YRS( May 7 th . 2011)
    4. 70 thousand per annum in PPF( 2011 Jan, in my husband’s name)
    5. 38 thusand in eevan aanand ( 2008 J une Insurance policy in my Husband’s name for next 25 yrs)
    relevent information: 1.I want 40 lakhs for baby higher education in after 15 yrs) 2. 30 lahks for her marriage
    3. 1 cr to maintain my present life style( when I will be of 60 now i am 29 )

    Please give me a rough idea , how much I need to save more monthly, to achieve the above goal, also suggest some good MFs( SIPs)
    Your guidance will really make a difference in my life.Please do guide me
    Thanks a lot…..

    • Thanks Sangeeta for trusting us for such important guidance. But I will suggest you to hire some good advisor in your city rather than following what I am going to write. I am just adding my comments on the data that you have shared.

      I have already did many mistakes by investing in KV and banks FDs.
      > Every asset class has it’s own importance in total portfolio. But putting 100% in a single asset class can be a bad decision.
      I have a 9 months old babygirl and I want to save for her education and marriage.
      Please take some time and guide me.Here is what I have already invested.
      1. INR 4 LAKHS Kissan vikas patra.( IN 2010 Oct.)
      2. 1 LAKHS IN BANK FDS (- do-)
      > You have decent debt & now there is no need to add more for few years.
      3.5000 monthly through SIP ( ICICI PRUDENTIAL FOCUSED BLUE CHIP) FOR 3 YRS( May 7 th . 2011)
      > You should divide your portfolio in 3-4 funds.
      4. 70 thousand per annum in PPF( 2011 Jan, in my husband’s name)
      >Great decision – keep adding till your retirement.
      5. 38 thusand in eevan aanand ( 2008 J une Insurance policy in my Husband’s name for next 25 yrs)
      > My suggestion will be to discontinue this 🙁
      relevent information: 1.I want 40 lakhs for baby higher education in after 15 yrs) 2. 30 lahks for her marriage
      I will suggest you to use this software
      https://www.retirewise.in/2011/04/free-personal-finance-software-perfios.html
      3. 1 cr to maintain my present life style( when I will be of 60 now i am 29 )
      > I think this will not be sufficient.

      Please give me a rough idea , how much I need to save more monthly, to achieve the above goal, also suggest some good MFs( SIPs)
      For SIP you can choose Fidelity Equity, DSP BR Equity, Templeton Growth Fund, HDFC Top 200 etc

  45. Hi Hemant,

    First of all, let me express my gratitude for initiating me into this complex knowledge on economics. I intend to continue as and when time permits to know more about it. I happened to run into your article on gold investment by chance and thats how I got introduced to you. And here I am with a question…

    i am an NRI liviing in France and would like to know on how to go about investing 50 lacs of NRE funds that I have for long term. How should I distribute it ? Is it repatriable ?And wont you give some advises on the different possible investments ?
    Thanking you once again.

    Ravindran

  46. Hi Hemanth,

    I don’t have any investments as of now. We Just Bought house, no loan. We thought of investing in SIP around 8000 per Month. Want to take out the money after 3years. Could u please suggest me which is the best. Is it really good to invest SIP for short term. I need money definitely after 3 years. If SIP is not good for 3years, could u please suggest me the best way to invest for short term with good returns

    • Hi Gnaneswari,

      3 years is really a short period if I talk about Equity SIP. For 3 years going for bank RD or investment in short term & medium term debt plans will be better.

  47. Hi Hemant,

    Iam 24 and I have started SIP since January this year in these funds (2500 pm each)
    1) DSPBR Micro cap fund (G)
    2) HDFC Equity (G)

    And I’ve invested 15000/- lumpsum in HDFC Taxsaver.

    I plan to go for my higher studies in the second half of 2012. I want to keep investing till that time and then allow my money to grow till I complete my higher studies and start investing again. Am I following the right path? How do you suggest I should go ahead?

    How does my portfolio look right now? I can invest an additional 3000 pm starting april. Which fund do u suggest for balancing my portfolio and avoiding over reliance on a single AMC at present?

    Thanks!

    • Hi Sri,

      you are on right path – go ahead.

      You can select some large cap fund for your new SIP.(different AMC)

  48. Hi Hemant,

    I am 24 years old and am investing Rs 2500 p.m. each in the following funds:

    Canara Robeco Equity Tax Saver Fund-Gr
    DSP BlackRock World Gold Fund-Gr
    HDFC Top 200 Fubd- Gr
    Reliance Regular Savings Fund Equityl Plan Gr

    I would like to know approx how much would be my ROI in the next 3 years as i intend to purchase a house?

    • Hi Avril,

      Equities are not for short term – in short term only luck prevails & in long term fundamentals.

      If you are lucky in 3 years your money will be double – in other case it can be half.

  49. Hi Hemant,

    I have invested Rs. 14,500 in diversified mutual funds through SIP for a total period of 10 years.

    the allocation of funds is as under :

    HDFC Top 200 Balanced Equity Fund – Rs. 2000 (for 3 yrs)
    Birla Dividend Yield Plus- Rs. 2000 (for 3 yrs)
    ICICI Dynamic Growth fund- Rs. 4000 (for 10 years)
    DSP Black Rock Top 100 – Rs. 4000 (for 10 years)
    DSP Black Rock T.I.G.E.R fune- Rs. 2500 (for 10 years)

    can you please enlighten me as to how much this will give at the end of 10 years. Is it necessary to rectify my portfolio.

    I also want to invest further Rs. 10000 through SIP.

    Can you pls. suggest me some fund for better return.

    Niraj K. Jha

    • Hi Niraj,

      HDFC Top 200 Balanced Equity Fund – is this HDFC Top 200 or HDFC Balanced or HDFC Equity?

      Rest of your portfolio looks OK – if you wish to increase your funds you can add Reliance Regular Savings Equity or Templeton India Growth Fund. (If you don’t have debt you can start one SIP in such fund)

      I would like to add that “Most important factor in investor return is their behavior rather than product.”

      • It is “HDFC Top 200 Fund”.
        I don’t have any debt at present.
        what should be the period of SIP if I invest in the above funds. Also suggest me the limit up to which I can invest in the above funds.
        I wish to know as to how the compounding works in the case of Mutual Funds?

        I have a fixed deposit of Rs. 2 lakhs which will mature in July, 2011. What would be the best option for investing the said deposit if it matures?

        Niraj K. Jha

        Niraj K. Jha

  50. Birla SL Frontline Equity Plan A
    DSPBR Micro Cap Regular
    DSPBR Opportunities
    DSPBR Small & Mid Cap Regular
    DSPBR Top 100 Equity
    Franklin India Blue Chip
    Franklin India Prima Plus
    HDFC Growth
    HDFC Top 200
    ICICI Pru Discovery
    ICICI Pru Dynamic
    IDFC Premier Equity Plan A
    Reliance Banking
    Reliance Diversified Power Sector
    Reliance Equity Fund
    Reliance Equity Opportunies
    Reliance Growth
    Reliance Pharma
    Reliance Regular Savings equity
    Reliance Vision Fund
    Sundaram Select Mid Cap

    what about the above Fund Investments. Rs: 2000/- each

        • Hi Vishvanathan
          The drawbacks of your portfolio are as follows :
          There are 21 schemes whereas you should not be investing in more than four or five schemes.
          You have too many schemes from same fund house.You should have only one scheme from one fund house.
          Keep only DSPBR top 100 equity , Franklin India Bluechip , HDFC Top 200 , IDFC Premier Equity and Reliance Equity Opportunities and exit from all other schemes.

  51. Hi,
    I have SIP in following funds;

    HDFC Equity
    Frankline Blue chip
    Fidelity equity
    Reliance equity opportunity

    If any change is required? I also have LS investment in;

    HDFC Prudence
    Sundaram Select Midcap

    pl suggest if my investment is right. I am also looking for starting another SIP, any suggestion.

    Thanks, Vikas.

    • Hi Vikas,

      Your portfolio looks decent.

      Only thing you consider while increasing SIP is that right now you have too many SIPs in multicap Funds. So you should consider adding a large cap & mid cap sip.

  52. Hi Hemant,

    i have started the following SIPs recently:-

    1. HDFC Top 200 INR 4000
    2. Sundaram ELSS INR 3000
    3. Reliance Growth INR 4000
    4. SBI Magnum Contra INR 4000
    5. HDFC Prudence INR 6000
    6. IDFC Equity Plan A INR 8000

    Can you comment on my portfolio and advice if i am overdoing SIPs? I am 30 and have a 1 year old daughter. I am a late starter when it comes to MFs (top 4 of my SIPs started July last year, the rest since Jan this year) and so want to maximize my equity exposure through MFs, though i understand the power of compounding means that i may never achieve the results had i started a little earlier. Besides, I have 2 PPF a/c opened and also invested 50k in Reliance MIP last year, to cover the debt part. I also have an iTerm plan with a coverage of 70lacs. I have a self bought home, and so no outstanding loan. Any suggestions that you would want me to give?

    • Hi Sumeet,

      Just commenting on your MF holdings:
      1. First 3 Funds are good.
      2. Why you are having investment in SBI Contra & IDFC Equity
      3. Why there is not a single fund in Mid Cap (I don’t count Reliance Growth a Mid Cap Fund)
      4. Why HDFC Prudence Fund (ya it’s amazing fund) but when you are constructing a portfolio – 2 funds from same fund house does not make much sense.
      5. Why there is not a single fund from DSPBR – when it’s funds are consistently outperforming their categories.

      • Thanks Hemant,

        2. SBI Contra has been a consistent performer. I know it’s not performing that well for some time, but since i had a long horizon for investments, i chose it.
        3. IDFC Equity fund Plan A is a small/mid cap fund, isn’t it? And it has been a good performer if i take the time frame of last 5 years.
        4. HDFC Prudence was chosen to have a balanced fund in the portfolio. I thought it was the best fund available in that category, so didn’t look at other fund houses.
        5. I had a choice b/w DSPBR and SBI Magnum. I chose latter, reason mentioned in #2.

        Thanks
        Sumeet

        • Hi Sumeet,

          It’s good do know that you are having some idea about what you are doing.

          Please find my inline reply
          2. SBI Contra has been a consistent performer. I know it’s not performing that well for some time, but since i had a long horizon for investments, i chose it.
          >This Fund is no more a contrarian fund – now it is a normal multicap fund. In last 1,3,5 years it is not even in top 2 quartiles(Below average).
          3. IDFC Equity fund Plan A is a small/mid cap fund, isn’t it? And it has been a good performer if i take the time frame of last 5 years.
          >IDFC EQUITY Fund A is a large cap fund & is an average performer. Hope you are not talking about IDFC Premier Equity.
          4. HDFC Prudence was chosen to have a balanced fund in the portfolio. I thought it was the best fund available in that category, so didn’t look at other fund houses.
          >As I said it is awesome fund but when we talk about portfolio construction & asset allocation better decision would have been increasing SIP in TOP 200 + investing in some debt fund. (Just compare there top holdings to see overlapping in stocks)
          5. I had a choice b/w DSPBR and SBI Magnum. I chose latter, reason mentioned in #2.
          > Mentioned in #2

          • Thanks for your advice Hemant. I’ll definitely try to implement them. BTW, i have IDFC Premiere Equity fund only. Apologies for that!

            • Welcome Sumeet – it was really a nice discussion with you.

              I really liked 2 things about you – first you have good idea about what exactly you are doing & second taking second opinion. 🙂 Both are equally important for every investor.

  53. Hi Hemant,
    I am 45 years old a defense personal, as my saving/ subscription@Rs 16,000/-PM in Provident Fund only, now I want to start SIP for amount to Rs 10,000/PM by reducing my Provident Fund. Please guide for two things (1) Will I get rebate u/s 80C for Income Tax and (2) suggest 4 or 5 Mutual Fund names with amount. I will required this money not before 5 years.
    Thanks

    • Hi Mr Narayan,

      It’s good to hear that now people have started understanding MF & its importance.

      Yes there are funds which give you rebate – read this article
      https://www.retirewise.in/2010/12/elss-tax-mutual-fund-india.html

      You can choose 2 funds from the above link.

      You should also start investing in normal Diversified Equity Funds(no benefit under sec 80 C) – for that you can choose HDFC Top 200, DSP Equity Fund & Reliance Regular Saving Equity.

      Still have some query please feel free to ask.

  54. Hi Hemant,

    I’m 30 years old and investing Rs 10000 per month in following mutual fund. HDFC Top200 : 4000
    HDFC equity fund growth fund: 3000
    BSL Frontline equity fund: 300
    Please suggest the Risk factor and fund selection?

    • Hi Rahul,

      Sorry for delay in replying your mail as I was traveling.

      Funds are good but portfolio is not good.

      70% of your amount is going in single fund house this makes your portfolio risky. Mys suggestion is stop your SIP of HDFC Equity Fund & start it in DSP BR Equity Fund.

  55. Hi Hemant,
    I have sip in HDFC top 200(255), HDFC Tax saver(4000), Reliance growth(2000), reliance eq opp(2000), re adv fund(1000) & lic policy 1000. I need Rs 1 crore after 15 year what should I do.

    • Hi Vijay

      To build a corpus of Rs 1 Crore you need to invest approximately Rs 15000 per month – if we assume a return of 15% in this period. You are already investing Rs 11500 in mutual funds & Rs 1000 in LIC. You can increase your sip by differential amount. Your portfolio looks diversified but few basic things are ignored while constructing it; First HDFC AMC is a good AMC but still 50% exposure to it makes your portfolio risky, Second multiple funds from single AMC again exposes you to risk of underperformance. My suggestion is reduce the overlap & add few other funds like DSP BR Equity Fund, Sundaram select Mid Cap, Templeton India Growth Fund.

  56. Hi Hemant
    I am 80 years old retired officer. I have a 45 years old unmarried daughter. I invest in under which insurance policy or mutual fund so that after 5 years she could get 6,000 Rs per month? Guide about Day-treder technical chart and technical analysis.

    • Hi Ganesh Ji

      If we assume that your daughter needs this amount for 30 years & you also want to consider impact of 5-6% inflation – for this you have to invest Rs 7.15 Lakh which can become Rs 12.50 Lakh at approx rate of 12%. You should invest in Balanced Funds & Diversified equity Funds – you can select HDFC
      Prudence Fund, Reliance Regular Saving Balanced, DSP Top 100 & Templeton Growth Fund. I will suggest you should keep your investments very simple & you should refrain from day trading or technical analysis.

    • Hi Vipin

      These days investors opting for Systematic investment plan (SIP) has increased, approximately 24 lakh SIPs have been added in last 1 year – this is a big number. But do people really understand SIP as lakhs of SIPs were discontinued when markets were struggling in 2008-09. SIP in Equity Funds would work the best in case markets are going down and not when the markets are rising. But the fact that we don’t know when the markets will be heading south and when it be heading north, it is prudent to run your SIP always so that you average out. So my suggestion to you is if you are committed to 20 years contentious investment without playing with market then only you have a chance to make money. You can make your portfolio from HDFC Top 200, DSP Equity, Reliance Regular Savings Equity Fund.

    • Hi Rajendra

      There are different ways by which investor can invest in Mutual Funds. Simplest way will be finding a mutual fund agent in your locality or reaching to nearest branch of any private bank, they can help you in choosing the funds & completing the formalities. They may charge some amount for this service as now there is no entry load. If you have idea of which funds you want to invest in & you also like to save your advisory fees you can reach directly to mutual fund companies – they will assist you in filling the forms of your companies. With technology development there are 2 more ways to start your mutual fund investment, first is through demat accounts & second is through online mutual fund webportals.

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