A mutual fund is one of the easiest ways to start investing, especially for beginners who want a simple structure without tracking markets every day. In a mutual fund, money from many investors is collected and managed by a professional fund manager. This pooled money is then invested in a mix of assets such as stocks, bonds, and other securities.

For people who want a guided and organised way to invest, mutual funds can help provide structure through disciplined investment habits. With the help of a mutual fund financial advisor, even new investors can start building their portfolio with more clarity.

In this guide, you will learn how mutual funds work, what types exist, and how to begin your own journey.

How Mutual Funds Collect and Use Your Money

When investors put money into a mutual fund, the fund manager invests that money according to the fund’s stated objective. This is known as mutual fund portfolio management, where a trained professional decides how much to invest in different assets.

Here is how the process usually works:

1. Money is pooled from many investors

This pooled amount becomes the total fund size.

2. The fund manager invests according to the scheme objective

For example, an equity fund buys stocks, while a debt fund buys bonds.

3. Investors receive units

These units represent their share in the fund.

4. The NAV changes every day

NAV, or Net Asset Value, reflects the current value of the fund’s holdings.

If you want help understanding which fund type suits your plan, you can speak with a mutual fund advisor at inXits, who can explain the choices in simple words.

Why People Choose Mutual Funds

Here are some reasons why beginners often prefer mutual funds:

Professional management

A trained fund manager studies companies, checks financials, and adjusts the portfolio as needed.

Diversification

Your money is spread across different assets, reducing the impact of one poor-performing investment.

Flexible investment options

You can invest monthly through SIP or make a lump sum investment.

Easy to start

You do not need advanced market knowledge or constant monitoring.

Types of Mutual Funds

Equity Funds

These invest in stocks and suit long-term investors who can handle market ups and downs.

Debt Funds

These invest in bonds, government securities, and fixed-income instruments.

Hybrid Funds

These combine both equity and debt in varying proportions.

Index Funds

These follow a market index such as Nifty 50.

Solution-oriented Funds

These target long-term goals like retirement or children’s education.

Direct vs Regular Mutual Funds

Mutual funds are available in two plans: Direct and Regular.

Direct Mutual Funds

• Purchased directly from the fund house
• Lower expense ratio
• No distributor commission included
• Suitable for investors who can manage fund selection and monitoring on their own

Regular Mutual Funds

• Purchased through a distributor or advisor
• Slightly higher expense ratio due to advisory and service support
• Includes guidance, portfolio reviews, and ongoing assistance

How You Earn Returns From Mutual Funds

You earn through two possible sources:

1. Capital appreciation

If the value of the fund’s investments increases, the NAV rises.

2. Dividends

Some funds may distribute dividends from the profits they receive.

Remember, returns depend on market movements and fund performance. No advisor or platform can guarantee returns. SEBI also does not allow any assurance of performance.

Taxation on Mutual Fund Returns: Short-Term vs Long-Term

Mutual fund returns are taxable, and the tax treatment depends on the type of mutual fund and how long you stay invested.

Equity Mutual Funds

• Short-Term Capital Gains (STCG):
  If units are sold within 12 months, gains are taxed at 15%.
  
• Long-Term Capital Gains (LTCG):
  If units are sold after 12 months, gains above ₹1 lakh in a financial year are taxed at 10% (without indexation).
  

Debt Mutual Funds

• If units are sold within 36 months, gains are added to your income and taxed as per your income slab.
  
• If held beyond 36 months, long-term taxation rules apply as per prevailing regulations.
  

Tax rules may change over time, so it is advisable to consult a mutual fund advisor to understand how taxation impacts your investment plan.

How to Start Investing in Mutual Funds

1. Complete KYC

Your PAN, Aadhaar, and other basic details are needed.

2. Open a mutual fund account or use a distributor service

Many people prefer guided platforms to avoid confusion.

3. Choose between SIP or lump sum

SIP is popular among beginners because it encourages discipline.

4. Select your funds

Choose based on goals, not based on popularity.

5. Monitor periodically

Review once every few months instead of checking daily.

If this feels too technical, you can talk to inXits for step-by-step support through their mutual fund expert consultation service.

How Mutual Fund Portfolio Management Works

Mutual fund portfolio management involves:

• Allocation of your money
• Ongoing research
• Making adjustments based on market conditions
• Managing risk levels
• Keeping the portfolio aligned with the scheme objective

Since this requires constant study, many investors prefer getting support from a mutual fund advisory firm for clarity. inXits can offer personalised plans that suit your goals without making any performance claims.

Understanding Expense Ratio and Exit Load

Before investing, it is important to understand two common cost-related terms:

Expense Ratio

The expense ratio is the annual fee charged by the mutual fund to manage your investment.
It includes fund management, administrative, and operational costs.
A lower expense ratio generally helps improve net returns over the long term.

Exit Load

Exit load is a charge applied if you withdraw your investment before a specified period.
It is used to discourage early withdrawals and maintain fund stability.
Not all funds have exit loads, and the structure varies from scheme to scheme.

A mutual fund advisor can help you compare funds not just on returns, but also on costs. inXits ensures transparency by explaining all charges clearly before you invest.

How a Mutual Fund Advisor Helps Beginners

Here is what an advisor or consultant usually does:

1. Understands your financial goals

Short-term needs, long-term goals, family plans, and savings habits.

2. Checks your risk comfort

This ensures you do not choose funds that feel stressful later.

3. Creates a clear plan

This includes SIP amounts, fund selection, time horizon, and review frequency.

4. Reviews your portfolio regularly

This helps you stay aligned with long-term plans.

When Should You Consider Getting Advisory Support

You may want help when:

• You do not know how to compare funds
• You want a long-term plan
• You are unsure how much to invest
• Market movements make you anxious
• You want a structured portfolio

A professional like inXits can guide you with simple processes and easy-to-understand suggestions.

Conclusion

Mutual funds offer a simple way to start investing and build long-term habits. With professional management, easy entry, and diversification, they suit many types of investors. But choosing the right fund and understanding the process is important.

If you want help at any stage, whether it is fund selection, SIP planning, or portfolio review, the inXits advisory team is available with clear guidance and free 24×7 support. A calm and well-planned approach can help you build a strong financial path through mutual fund investing.

Frequently Asked Questions (FAQs)

1. Are mutual fund returns guaranteed?
No. Mutual fund returns depend on market performance and fund strategy. SEBI regulations do not allow guaranteed returns.

2. Is SIP better than lump sum investment?
SIP helps investors invest gradually and manage market volatility. Lump sum investments may suit investors with surplus funds and higher risk comfort.

3. Can I withdraw money from mutual funds anytime?
Most mutual funds allow redemption at any time, but exit loads or tax implications may apply depending on the fund and holding period.

4. Do I need a mutual fund advisor to invest?
An advisor is not mandatory, but many investors prefer professional guidance for fund selection, portfolio planning, and regular reviews.

5. How does inXits support mutual fund investors?
inXits offers clear guidance through SEBI-registered professionals, helping investors understand fund choices, SIP planning, taxation, and long-term portfolio management with simple explanations.

Mandatory SEBI Warning And Disclaimer

Investment in securities market are subject to market risks. Read all the related documents carefully before investing.

Registration granted by SEBI, membership of BSE and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.
The securities quoted above are for illustration only and are not recommendatory.