Are you new to investing and wondering how to grow your money safely? Mutual funds can be a great place to start. They offer diversification and professional management and are suitable for both beginners and experienced investors.
In this beginner-friendly guide, we’ll break down how to invest in mutual funds simply and practically.
Mutual Fund SIP is a recurring investment( usually monthly) in mutual funds. Just like you invest your money in a Recurring deposit, similarly, you can invest in mutual fund SIP also.
What are Mutual Funds
Table of Contents
Why Should Beginners Consider Mutual Funds?
- Diversification – Your money is spread across many companies, reducing risk.
- Professional Management – No need to pick individual stocks.
- Affordability – Start investing with as little as ₹100 per month via SIPs.
- Transparency – Regular updates and performance tracking.
How to Invest in Mutual Funds for Beginners: Step-by-Step
1. Set Your Investment Goal
Before you start, be clear about:
- Why you’re investing (retirement, education, home purchase, short term money saving etc.)
- How long you want to invest
- Your risk tolerance (low, medium, high)
2. Choose the Right Type of Mutual Fund
Here are a few common types:
- Equity Funds – For long-term wealth creation (higher risk, higher return)
- Debt Funds – For stable, short-term income (low to medium risk)
- Hybrid Funds – Mix of equity and debt (balanced risk)
- Index Funds – Track a market index like Nifty or Sensex (low cost, passive investing)
3. Pick Between SIP and Lumpsum
- SIP (Systematic Investment Plan) – Invest a fixed amount regularly (e.g., monthly)
- Lumpsum – Invest a large amount at once
Beginners often prefer SIP because it builds discipline and averages out market fluctuations.
4. Choose a Platform to Invest
You can invest in mutual funds via:
- Official AMC websites (like HDFC MF, ICICI Prudential MF, etc.)
- Online Registrar Platforms ( CAMS, KFinkart, MFCentral )
- Online platforms (Groww, Zerodha Coin, Kuvera, Paytm Money, etc.)
- Banks or financial advisors, Mutual fund distributors
Make sure the platform is registered with SEBI.
5. Complete KYC (Know Your Customer)
KYC is mandatory before investing. You can complete it online with:
- PAN Card
- Aadhar Card
- Bank Details
6. Track and Review Regularly
Check your fund performance every 6–12 months. If your goal, risk profile, or fund performance changes, consider switching or rebalancing your investments.
What is Systematic Investment Plan in Mutual Fund ?
Mutual Fund SIP Full Form is a Systematic Investment Plan. SIP is a way to invest in a mutual fund scheme.
Here you pay after a FIXED Time duration and a Fixed Amount. You commit to investing a fixed amount after a definite interval ( say, monthly, quarterly, half-yearly or yearly).
You can choose to pay daily, weekly monthly, quarterly, half-yearly, or yearly, however, the monthly mode is famous for its convenience.
If you are salaried or get a regular payout from your business or profession then you can opt in to invest in mutual funds via SIP.
What is the difference between a Mutual Fund and SIP?
A mutual fund is a fund or scheme that pools in money from people while SIP is a method to invest in a mutual fund.
For example, my friend Bestii invested in the SBI Mutual Fund scheme, let’s say the SBI Contra Fund. Now he can invest either as lumpsum (one-time investment) or via SIP ( paying every month or other interval). Here, he is investing in a mutual fund scheme,
You can invest in this mutual fund scheme via two ways either lumpsum or via SIP ( systematic investment plan). You can also invest a lumpsum amount in a fund and start SIP in the same or a different fund.
How Mutual fund SIP works- with Example
Say, Mr. Bestii Singh started a monthly SIP of Rs 10000 in January. He paid in January, February and March only. Let’s assume that he foreclosed his SIP before time.
After some time say in December next year, he withdrew his entire amount.
Here He purchased units in January @ Rs 10 ( NAV/Purchase price), in February @ Rs 11, and in March @Rs 9.5. So he could purchase a different number of units each month with the same amount of money. This is because of the reason of price change in mutual fund unit rate.
Now, say at the time of sale ( redemption), the unit price( NAV) increased to Rs 13. So he will get Rs.38502.38.
The mutual fund works on a unit basis. The money you invest is divided by the NAV ( just like you go to the market and purchase one piece of soap or a toothpaste similarly you purchase here a unit of mutual fund).
As the price (NAV – Net Asset Value) of mutual fund keeps on changing, you are allotted a different number of units.
Let’s understand with an example of How SIP works:
| Month | Amount | NAV/ Purchase price | Units | No of units |
| January | 10000 | 10 | 10000/10 | 1000 |
| February | 10000 | 11 | 10000/11 | 909.09 |
| March | 10000 | 9.5 | 10000/9.5 | 1052.63 |
| Total No of units | 2961.721 | |||
| Suppose now you want to sell | 13 | Money value 2961.721*13 =38502.38 | ||
How to invest in SIP
To invest in a MUTUAL FUND Scheme, the investor should be KYC compliant. The investor can complete CKYC either through physical form or online mode.
Post KYC, one can invest easily in mutual funds.
For New Investors- KYC process Through Form (Offline)
You require following documents:
- passport size photo
- address proof
- Aadhar card
- Voter ID ,
- Passport
- driving licence
- Job card issued by NREGA duly signed by an officer of the State Govt.
- The letter issued by the National Population Registrar containing details of the name address or
- Any other document as notified by the Central Govt. in consultation with the Regulator
- PAN Card (if investment is less than 50000 then PAN card copy is not mandatory, but it is advisable to mention PAN card number.
CKYC Process
- Fill CKYC Form – Basic details such as name, date of birth, address, parents name,PAN number, Aadhar number, phone number and email address etc.
- paste passport size photo signed across
- Attach self attested documents – PAN Card & Address Proof
- all the documents must be attested by an ARN holder or Gazetted Officer, bank manager or by AMC authorized staff.
- Sign form
You also need to submit investment forms ( common application form) also with KYC form. For SIP registration attach SIP form and Auto debit form ( NACH) also.
Don’t forget to add a cheque favouring fund name.
For instance you can write down fund name such as Aditya Birla Sun Life Frontline Equity Fund.
How to invest in SIP in India – Online
- Keep all documents Ready ( scanned copies in jpeg, jpg format)
- Complete KYC ( For first time investors)
- Choose the right plan
- Register for SIP
- Select investment amount
- Choose investment date
- Choose investment duration
- submit
- Make payment
Step1: Complete your KYC
To complete your KYC you should be ready with soft scanned copies of your above said documents i.e pan card, Aadhar card, cheque copy and your photo, signature ( all documents should be saved in jpeg format.Visit AMC website/ Cams/ Karvy.
- Go to new investor or first time investment or new investor tab.
- Fill in your personal information like your name, date of birth, address, nominee, phone number etc. and
- upload your documents as it asks for.
- Make payment
Alternative easier method using your Aadhar Card
You can easily be KYC compliant just entering your Aadhar card number also. But you can invest only upto Rs 50 K through this method.
- Enter your Aadhar number
- Submit OTP sent to your registered mobile number
- Your basic details will be automatically be filled in
- There is no need of video call
- Make investment either lumpsum or start an mutual fund SIP
STEP 2 : Register for an SIP
- Go to the AMC website/ Cams/Karvy
- Register a new account ( to do this look for a button like ‘new investment’ , ‘intiate investment’ , ‘ new investor’.
- Once you click this button, this will take you to a form. You need to fill your basic information like your name,address,phone number , date of birth etc.
- At this time you also have to choose your email id and password for carrying out transaction online.
- Fill in your bank account details from which you wish to start your SIP.
- Once you fill in information and AMC portal has sent confirmation, you can start your SIP.
STEP 3 Select the Right SIP
- Choose the amount and frequency as per your need and your payment capacity.
- Choose a SIP date carefully. Ideally, it can be at the start of the month when you get your salary in your account.
- Choose a growth option for money appreciation.
- If you wish to increase the SIP amount periodically say each year then you can opt for the SIP TOP Up option also.
Conclusion
i hope you have learned ‘How to invest in mutual funds for beginners ‘ – just follow the investing tips and start your investment easily. Just decide how long you wish to invest, and just by knowing your investment duration, you can choose the type of fund you can invest in – Equity, debt or Hybrid. You can also choose the asset allocation based on your risk appetite.
However, the beginners can start investing with debt or hybrid funds for initial stages ( if have short investment duration).
How to Plan Your Investment?
You can always work with a Certified Financial planner and plan your finances, including Emergency funding, building a corpus for house purchase, and taking care of your health needs so that you can plan a better retirement income in your second inning, leading to a more secure and financially stable retirement.
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