Mutual funds are slowly becoming a retail favourite in India. Retail participation in this asset class has seen a strong 24% CAGR in Assets Under Management (AUM), exceeding the institutional investors’ 22% CAGR over 5 years. The year 2026 also brings a similar expectation.
For beginner investors, a clear understanding of how to invest in mutual funds in 2026 will serve as a well-balanced guide. This will bring clarity on the characteristics of mutual fund investing and their significance.
How to Invest in Mutual Funds in 2026
Choosing a fund to invest in purely based on the last 1 year’s returns is the wrong approach to mutual fund investing. Upon understanding your investment goals, expectations, and risk appetite, you may begin looking for suitable funds for your investment portfolio. The right method of seeking a suitable mutual fund involves using tools like financial analysis and ratios, along with technical indicators. Once an investment opportunity clicks, you can begin investing in the fund using modes like Systematic Investment Plans (SIPs) or lump-sum investments. A detailed guide on how to invest in mutual funds is provided in the coming sections.
Why Should You Invest in Mutual Funds?
Mutual fund investments bring a range of benefits and features for investors. Some include:
Risk diversification
The most common and attributable advantage of mutual funds is the benefit of ‘diversification’. In mutual funds, diversification is created by investing in different types of stocks, asset classes, sectors, and others. Investing across asset classes and stock types helps diversify the risk of the entire portfolio. In this scenario, if one stock or asset underperforms, the returns may not be widely affected, as better performance of other stocks may balance out the loss.
Professional Management
Mutual funds are professionally managed by fund managers, who are responsible for investment decisions and frameworks. These experienced professionals bring with them a strong outlook, professionalism, and expert guidance. This translates into the overall performance of the mutual fund. As you invest in that mutual fund, you get access to this professional management by paying a small fee, such as the ‘expense ratio’, towards the fund management and administration. Top mutual funds in India have expert managers. For example, many Axis Bank funds like Axis Large Cap fund, Axis ELSS fund, etc are managed by top fund manager Mr. Shreyash Devalkar.
Range of solution
Mutual funds offer a wide range of solutions for your particular preference. For example, if your goal is to invest for the long-term with stable income, you may consider investing in a large-cap mutual fund or a debt fund. Instead, if your goal is to save taxes, tax-efficient funds such as the ELSS funds may be helpful. In general, mutual funds are tools for long-term wealth creation and help create a significant corpus over time.
Mode of Investment
Investment modes for mutual funds include SIP and lump-sum methods. Through the SIP route, you can invest a fixed sum in regular intervals that help in rupee cost averaging and compounding benefits. SIPs are tools of disciplined investing that allow even a small sum invested regularly to grow into a meaningful corpus.
For example, an investor may begin a monthly SIP of ₹5,000 in a large-cap fund, expecting to grow at 12% annual returns. This amount can grow significantly over time. Let’s consider how:
| Year | Corpus |
| 5 | ₹4,05,000 |
| 10 | ₹11,20,000 |
| 15 | ₹23,79,000 |
| 20 | ₹45,99,000 |
Tax benefits
Some mutual funds are specifically designed to achieve tax benefits. For instance, Equity Linked Savings Scheme (ELSS) Funds are tax-efficient funds that provide tax benefits under Section 80C of the Income Tax Act, 1941. ELSS funds qualify for tax deductions up to ₹1.5 Lakh. Alongside, long-term capital gains on equity funds are tax-free up to ₹1.25 Lakh.
Tax rebate
While tax benefits reduce your taxable income, a tax rebate directly lowers the tax payable after calculation. In India, individual taxpayers with total income within the basic exemption and rebate limits can claim relief under Section 87A of the Income Tax Act. Mutual fund investments, especially through ELSS and other eligible instruments, can help structure income efficiently so that the final taxable income falls within the rebate threshold.
Liquidity
Mutual funds can be converted into money quickly. This is because units of mutual funds can be easily redeemed on any business day. Investors can easily buy and sell units of mutual funds at any time at the prevailing Net Asset Value (NAV). Thus, in times of need, conversion of mutual fund units into cash is easy and quick.
How to Start Investing in Mutual Funds
Investing in mutual funds begins with understanding your own risk appetite and return expectations. Based on this, decide how much of your money should go into equity, debt, or hybrid funds to maintain balance and control risk. Next, shortlist funds that match your financial goals by reviewing their performance history, cost structure, and management quality. After selecting the appropriate scheme, invest through SIP or a lump sum as per your convenience. Diversifying across different funds and reviewing your portfolio periodically helps keep investments aligned with changing goals.
Here are ways to invest in mutual funds using different avenues:
Through Distributor
Picking the right fund for you may seem like a time-consuming process. However, a registered mutual fund distributor may help you with suitable fund opportunities that fit well with your goals. A mutual fund distributor is required to assess and analyse your investment goals and risk profile before suggesting mutual fund products.
Through AMC
Investors can invest directly through the mutual fund company (AMC). This can be done by visiting their branch or website. Always consider investing through a direct plan rather than a regular growth one. Direct plans usually have lower expense ratios as no distributor commission is involved.
Registered Investment Advisor (RIA)
Registered Investment Advisors provide professional and unbiased financial advice for a fee. Their package includes a comprehensive financial service as they broadly plan your investments. These may not just be limited to mutual funds. Their advice is personalised, with specially designed portfolios based on your financial goals and risk profile. This method is suitable for investors seeking personalised guidance. They also provide monitoring services and a regular overview of your investments.
RTAs
Registrar and Transfer Agents (RTAs) handle mutual fund transactions for AMCs. Investors can use RTA platforms to invest in multiple fund houses using a single login. They provide convenience and consolidated portfolio tracking. They also help with all concerns of investors related to their investments.
Through Online
Online investment platforms and mobile applications allow paperless investing. Investors can complete KYC, select funds, start SIPs, and monitor portfolios digitally. This is the most convenient method for new-age investors. These platforms provide investor insights, give recommendations, provide reports, and details related to mutual funds, all in one place. This keeps the investment journey smooth for investors.
Documents Required to Invest in Mutual Funds
To start investing in mutual funds, you must ensure the following documents are available:
- PAN card
- Aadhaar card
- Bank account details and cancelled cheque
- Passport-size photograph
- Proof of address
- Nominee details
These documents are used for identity verification and compliance purposes.
How to Check Your KYC Status
KYC status can be checked online using the PAN number on authorised KYC portals. Look at the steps involved here:
- Visit any authorised KYC verification portal and select the option to check KYC status.
- Enter your PAN number and complete the captcha or OTP verification.
- The system will display your current KYC status as Registered, Verified, Pending, or Not Registered.
- If your KYC is shown as Pending or Not Registered, complete the process using Aadhaar-based authentication or in-person verification.
- Once updated, the KYC remains valid for all future mutual fund investments and does not need to be repeated.
