Mutual funds, explained

A mutual fund pools money from many investors and invests it according to a stated objective — in shares, bonds, money-market instruments or a mix. Each investor owns units, and the value of each unit is the scheme’s NAV. Mutual funds in India are regulated by SEBI, and every scheme publishes its portfolio, costs and a riskometer. Returns are market-linked and not fixed in advance. Mutual fund investments are subject to market risks, read all scheme related documents carefully.

An SIP invests a fixed amount at regular intervals; a lumpsum invests a single amount at once. An SIP suits money that comes from monthly income and spreads your entry across market ups and downs. A lumpsum puts the full amount to work immediately, which helps if markets rise and hurts if they fall soon after. Many people use both. The SIP Lab lets you compare them with your own assumptions.

Every scheme has a direct plan, bought straight from the fund house, and a regular plan, bought through a distributor. Both hold the same portfolio. The regular plan’s expense ratio includes the distributor’s commission, so it is higher, and its NAV grows a little more slowly over time. In return, a distributor provides services such as help choosing schemes, paperwork and reviews. How CompoundX is compensated is set out on our Disclosures page.

Yes. Most fund houses let you pause an SIP for a limited period, change its amount or date, or stop it altogether. Units you already hold stay invested and can be redeemed under the scheme’s terms, subject to any exit load and, for ELSS, the three-year lock-in. Requests usually need to reach the fund house some days before the next instalment date; the notice period varies by fund house.

Under current rules, gains on equity-oriented funds held for more than 12 months are long-term: gains above ₹1.25 lakh in a year are taxed at 12.5%. Gains on units held for 12 months or less are taxed at 20%. Gains on debt funds bought on or after 1 April 2023 are taxed at your slab rate, however long you hold them. Surcharge and cess apply on top. See capital gains for more, and check current rules or a tax professional for your situation.

Under SEBI rules, fund houses must transfer redemption proceeds within three working days of the redemption date for most schemes, with longer timelines allowed for some — such as schemes investing mainly overseas — and in specified exceptional situations. Liquid and overnight funds typically pay out by the next business day. The NAV you receive depends on when your request reaches the fund house relative to its cut-off time.

CompoundX doesn’t name a fund for you to buy. Our tools help you work out what a goal may need, how your current holdings are spread, and how different categories behave, so you can narrow down what fits your horizon and comfort with risk. A CompoundX relationship manager can walk you through the options available on the platform; the final choice stays with you. For a personalised recommendation, consider a SEBI-registered investment adviser.