A Beginner's Guide to Investing in Mutual Funds in India

If you’re looking to invest in India, you – as a retail customer – have a few options. There are direct equities, which refers to the stock market. There are also bank fixed deposits, which most people tend to invest in. Commonly, most people just have a savings account where they park their money. 

Mutual funds are another option available to people who want to invest their money. A mutual fund is an instrument that puts various investment products into one basket. So when you buy a mutual fund, you are buying a basket of investments. Why is that helpful? 

When you buy into a mutual fund, you are giving your money to an industry expert who has built up years of expertise in managing money. An expert would have a more comprehensive understanding of which products work at what times, and even whether you should be buying them. Mutual funds also offer great diversification. Instead of buying into one, two, or even five stocks, a mutual fund allows you to spread your risk across various stocks. As a result, your risk is diversified. If you’re unsure of how to navigate the complex world of finance, you should consider managing your money through experts. 

There are institutions that buy into mutual funds. For example, a large company like Tata Motors will not keep all its money in a bank account. They would want to gain returns on their money instead, so they would invest in mutual funds. When a corporate company buys into mutual funds, it’s called institutional money.