The Asset Under Management (AUM) of the Indian mutual fund industry grew from ₹67 lakh crore at 2024 end to ₹81 lakh crore by November 2025. Record Systematic Investment Plan (SIP) contributions and rising retail participation are the main drivers of this 21% rise. Investors who are beginning their investment journey often find mutual funds ideal due to their automatic diversification, professional management, high liquidity, and so on. Furthermore, SIPs enable investment with limited contributions as well.
However, there are different mutual fund categories, with distinct return and risk profiles. While some require experienced investing, others are beginner-friendly and can serve as an optimal entry point for early investors to start their investment journey. Beginners often lack such a nuanced perspective on beginner-friendly mutual fund investments. Therefore, this blog aims to decode the best mutual funds for beginners, helping them make informed investments.
Best Mutual Funds for Beginners
Investments like mutual funds are not a monolithic investment medium. Mutual funds are categorised into different categories based on parameters like portfolio composition, management technique, liquidity, and so on. Therefore, while choosing the best mutual funds for beginners, it is necessary to take a category-wise look.
Open-ended Fund / Scheme
A type of mutual fund that does not have a fixed number of units; rather, it continuously issues and redeems its units at the prevailing Net Asset Value (NAV), enabling investors to enter and exit the fund on any business day. The points below illustrate how the open-ended funds operate.
- Continuous Buying and Selling: Open-ended funds do not pose any restrictions on their investors relating to when they can liquidate their investment. Therefore, investors can buy and sell their mutual fund holdings on any business day, at the prevailing NAV. The market value of a mutual fund per unit is referred to as NAV.
- Liquidity: Since holdings in open-ended funds can be liquidated at any time, investors enjoy high flexibility to fulfil their financial goals and change their allocations based on dynamic market variables.
Although open-ended and closed-ended funds differ based on their maturity, both of these broad categorisations are further sub-categorised into debt, equity, hybrid, and sectoral funds. This is why two open-ended mutual funds, for instance, can vary heavily in terms of risk and return if one belongs to equity and another to debt.
Therefore, investors must first analyse whether they want open-ended or closed-ended schemes, then, based on further research into subsequent categorisations like equity, debt, hybrid, and so on, choose the best mutual funds for beginners.
Let us now analyse what closed-ended funds are before moving into the further categorisations.
Closed-ended Fund / Scheme
A closed-ended mutual fund lies between a mutual fund and an equity, sharing both its features. Such a fund pools investments and invests in a range of assets, similar to mutual funds. However, unlike mutual funds, they trade on the stock exchange. A closed-ended mutual fund has a fixed number of units in circulation, and rather than offering continuous issuance and redemption, the secondary market allows its investors trade the units.
The points below illustrate how a closed-ended mutual fund operates.
- Initial Public Offering: Similar to equities, fresh units of a closed-ended mutual fund are issued in the stock market for the inaugural time through an IPO.
- Fixed Capital Structure: Once issued, a closed-ended fund does not issue any fresh units. Therefore, the fixed amount of capital raised during an IPO remains intact, as no issuance or any-time withdrawal occurs.
- Listed on the Stock Exchange: Although the mutual fund itself does not redeem the units, investors can trade the units at market value on the stock exchange, thereby gaining liquidity. The market price in this case might differ from the NAV.
- Maturity of the Units: A closed-ended fund has a predetermined maturity. It does not allow redemption whenever, but the original fixed amount raised is redeemed on a predetermined date.
Now, after analysing the closed and open-ended categories, investors can select an approach that fits them. Based on this selection, investors further analyse the mutual funds in various categories like equity, debt, hybrid, and so on, to pick the best mutual funds for beginners.
Let us start with the equity-oriented mutual funds.
Growth / Equity Oriented Scheme
Mutual funds that invest the primary chunk of their corpus into equity or equity-oriented assets are called growth or equity-oriented mutual fund schemes. These main goals are wealth accumulation and capital appreciation. According to the SEBI categorisation of mutual funds, the equity schemes are further classified into 13 categories, like large-cap, mid-cap, small-cap, and so on.
The table below highlights some of these categories and ranks the best mutual funds for beginners in them, based on their AUM as of 4 March 2026. Note that all funds are direct growth funds with active management.
| Mutual Fund | AUM(₹ Crore) | One-Year Return (%) | Three-Year Return (%) | Sharpe Ratio (%) | Standard Deviation (%) |
| Large-cap mutual funds allocate 80% of their total assets to large-cap business equities or equity-oriented assets. | |||||
| ICICI Prudential Large-Cap | 76,645.56 | 13.70 | 17.52 | 1.11 | 10.98 |
| SBI Large-Cap | 54,821.33 | 14.10 | 14.44 | 0.86 | 10.99 |
| Nippon India Large-Cap | 50,106.61 | 14.67 | 18.76 | 1.19 | 11.37 |
| Small-cap mutual funds allocate 65% of their assets to small-cap stocks, or equity-oriented assets. | |||||
| Nippon India Small Cap Fund | 65,812.16 | 12.50 | 20.17 | 0.93 | 16.75 |
| HDFC Small Cap Fund | 36,940.54 | 14.25 | 17.76 | 0.88 | 15.70 |
| SBI Small Cap Fund | 34,449.23 | 6.32 | 12.80 | 0.59 | 14.54 |
| Equity-Linked Savings Schemes (ELSS) invest 80% of their assets into equity or equity-oriented assets, but they have a minimum lock-in of 3 years, and investors can claim a tax deduction under section 80C of up to ₹1.50 lakhs. | |||||
| Axis ELSS Tax Saver Fund | 32,930.15 | 10.43 | 15.33 | 0.83 | 12.27 |
| SBI ELSS Tax Saver Fund | 31,861.52 | 11.62 | 22.92 | 1.34 | 12.82 |
| Mirae Asset ELSS Tax Saver Fund | 26,111.95 | 16.39 | 17.18 | 0.99 | 12.49 |
While the best mutual funds for beginners are among the equity category might help gain growth, they might not align with the requirements of conservative or risk-averse investors. Therefore, let us analyse another key mutual fund category, called debt funds, that aligns more with risk-averse early investors.
Income / Debt Oriented Scheme
Debt-oriented mutual funds invest primarily in debt instruments that might vary across duration. Debt assets offer fixed-income and have a lower risk profile compared to equity, making debt funds suitable for more conservative or risk-averse investors. The table below highlights the top three debt mutual funds, selected based on their AUM, as of 4 March 2026. Investors must remember that these direct funds are under active management.
| Mutual Fund | AUM(₹ Crore) | One-Year Return (%) | Three-Year Return (%) | Sharpe Ratio (%) | Standard Deviation (%) |
| HDFC Liquid Fund | 59,966.31 | 6.40 | 6.98 | 3.56 | 0.19 |
| SBI Liquid Fund | 59,282.02 | 6.32 | 6.81 | 3.43 | 0.19 |
| Aditya Birla Sun Life Liquid Fund | 54,614.77 | 6.46 | 6.94 | 3.90 | 0.20 |
However, similar to equity, the debt category of mutual funds is further subdivided into 17 categories by SEBI. While each of the categories has its own unique feature, let us closely analyse two key categories and their best mutual funds for beginners.
Money Market Fund
Mutual funds that invest in money market instruments, which have a maturity period of up to one year, are called money market mutual funds. The table below highlights the best mutual funds for beginners in this category, selected based on their AUM as of 4 March 2026. These are direct funds, with active management.
| Mutual Fund | AUM(₹ Crore) | One-Year Return (%) | Three-Year Return (%) | Sharpe Ratio (%) | Standard Deviation (%) |
| SBI Savings Fund | 37,079.14 | 7.19 | 7.52 | 3.37 | 0.35 |
| ICICI Prudential Money Market Fund | 35,024.96 | 7.27 | 7.57 | 3.31 | 0.37 |
| HDFC Money Market Fund | 34,062.71 | 7.26 | 7.56 | 3.30 | 0.37 |
Gilt Fund
Gilt funds are mutual funds that allocate at least 80% of their entire assets to government securities, with variable maturities. The table below lists the key gilt funds, selected based on their AUM as of 5 March 2026. These are direct funds, with active management.
| Mutual Fund | AUM(₹ Crore) | One-Year Return (%) | Three-Year Return (%) | Sharpe Ratio (%) | Standard Deviation (%) |
| SBI Gilt Fund | 10,551.74 | 5.58 | 7.67 | 0.48 | 3.04 |
| ICICI Prudential Gilt Fund | 9,240.09 | 7.04 | 8.08 | 1.00 | 1.91 |
| Kotak Gilt | 3,008.01 | 3.73 | 6.74 | 0.18 | 3.75 |
Apart from equity and debt mutual funds, investors may also analyse hybrid funds, which invest holistically across various asset classes; one key hybrid mutual fund category is the balanced fund.
Balanced Fund
SEBI has categorised hybrid funds into 7 categories, one of them being balanced hybrid funds, which can offer some of the best mutual funds for beginners. Balanced hybrid funds invest anywhere between 40-60% in equity and equity-oriented assets; similarly, debt instruments can also be between 40-60%. These funds aim to invest in both equity and debt assets with equivalence. The table below shows the key balanced hybrid mutual funds selected based on their AUM as of 4 March 2026. The funds mentioned below are direct growth funds, managed actively.
| Mutual Fund | AUM(₹ Crore) | One-Year Return (%) | Three-Year Return (%) | Sharpe Ratio (%) | Standard Deviation (%) |
| UTI Retirement Fund | 4,729 | 8.88 | 12.29 | 1.15 | 5.54 |
| UTI Children’s Hybrid Fund | 4,437 | 6.79 | 9.34 | 0.63 | 5.65 |
| 360 ONE Balanced Hybrid | 802 | 7.52 | – | – | – |
Besides equity, debt, and hybrid, SEBI also categorises mutual funds into other categories. One such fund category is the index funds.
Index Funds
Mutual funds that track a particular index, and invest at least 95% of their total assets into the securities of the index to replicate its performance, are called index funds. The table below lists the top direct, growth, and actively managed mutual funds in this category, selected based on their AUM, as of 4 March 2026.
| Mutual Fund | AUM(₹ Crore) | One-Year Return (%) | Three-Year Return (%) | Sharpe Ratio (%) | Standard Deviation (%) |
| UTI Nifty 50 Index Fund | 26,517.42 | 11.88 | 12.67 | 1.16 | 15.11 |
| ICICI Prudential Nifty PSU Bond Plus SDL Sep 2027 40:60 Index Fund | 8,952.92 | 7.73 | 7.90 | 3.36 | 0.73 |
| HDFC BSE Sensex Index Fund | 8,900.41 | 9.36 | 10.81 | 0.68 | 10.52 |
Analysis of funds and mutual fund categories is integral for selecting the best mutual funds for beginners. However, investors must also consider certain factors before undertaking their investment.
Factors to Consider Before Investing in Mutual Funds for Beginners
Elaborated below are the key factors that investors must consider before choosing the best mutual funds for beginners.
- Financial Goals: Investors must consider the financial objective they wish to achieve by undertaking the particular mutual fund investment. The goal will help determine the time horizon, liquidity needs, return expectations, and so on. Based on these parameters, investors can select a fund and category that suits them.
- Risk Profile: Investors also need to analyse their own risk appetite. An understanding of individual risk-bearing capacity is necessary to select a fund or category that fits the profile. Parameters like age, income, number of dependents, individual investment philosophy, etc., serve as the key basis of determining the risk profile.
- Category and Benchmark Performance: The performance of a category in general, along with the average risk metrics recorded by all the funds, delivers keen insights into the suitability of the category. Furthermore, several mutual fund tracks a particular benchmark to either replicate the performance or to outperform it. Analysing the benchmark itself can help understand the performance the fund aims to achieve.
- Fund Performance: The individual risk and return metrics of the fund are key points of analysis before choosing the best mutual funds for beginners. Comparatively analysing the performance of key players in a particular category is crucial for shortlisting.
- Expense ratio: Another important metric of judging the performance of a mutual fund is its expense ratio. This ratio suggests the annual fees that the fund house charges to manage the particular mutual fund. If the mutual fund charges high fees, the return available for distribution among investors is reduced and vice versa.
- Fund Managers: Mutual funds are managed by a team of portfolio managers. Exploring who these fund managers are, their experience and expertise can help judge the prospects of the fund. However, beginners might find it difficult to analyse this metric. Consistent practice of tracking fund managers over time can deliver keen insights.
Conclusion
Mutual funds can be an optimal starting point for investors beginning their investment journey, as they offer diversification benefits with limited contributions, along with other key benefits. The mutual fund landscape, in general, is witnessing a significant growth spurt in India, backed by strong retail participation. However, investors must strive to choose the best mutual funds for beginners through optimal research in their early stages of investing.
While the first step to mutual fund analysis begins with understanding the different categories and choosing one that fits the profile and goals of the investor in question, the next step must be to analyse the top funds of the category. Based on consecutive shortlisting, investors can choose the best mutual funds for beginners. However, like any asset, mutual funds are subject to market risk; therefore, due diligence is key.
