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28 Mar 2020

What is Mutual Fund

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What is Mutual Fund

A mutual fund is a professionally managed investment fund that takes money from investors and invests them in various securities (e.g. equities, debt). In essence, you are the investor who will give a certain amount of money to a mutual fund, and the fund managers will use that money to invest in various securities to give you a rate of return. For this, they will charge a fee (called expense ratio) that they use to make money.

Types of Mutual Funds

In India, there are a variety of mutual funds. Here are a few:
Multi Cap Mutual Funds
These funds are a great way to start, as they are invested in a variety of equities across industries, giving your portfolio a fair amount of diversification.

Tax Saving ELSS Funds
Since you can get up to Rs. 1,50,000 as tax exemption by investing in ELSS funds, these are a great starter fund as well.

Balanced Funds
A great way to start diversifying your portfolio across equities and debt, as balanced funds invest in both.

Ultra Short Term Debt Funds
Ideal if you’re planning a short-term financial goal as these funds are perfect for investing up to a year. Also recommended if you need your money to earn returns while you figure out your investing strategy!

Value Mutual Funds
These funds seek out ‘value’ funds that they believe are priced cheaply and can provide good returns in the long term - a good way to build out your long-term investing portfolio.

Short Term Debt Funds
Similar to ultra short term debt funds, but with a slightly longer time horizon (1-3 years). Similar to those funds, use these funds for short-medium term goals, as they are lower in risk than equities.
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How to Invest in Mutual Funds

You can invest in mutual funds by opening a North Loop account, filling out your risk profile and then selecting which fund you want to invest in! You will need to figure out what your financial goals are, how much you want to save and your risk appetite when deciding (luckily, we provide advisors to help with this). < Here is some more information on how to invest in mutual funds.

Why Invest in Mutual Funds

Investing in mutual funds is a good way to meet your financial goals, save for retirement and diversify your financial portfolio. Mutual funds provide a low-cost, high-return way of saving for long term goals, as well as the fact that they are easy to use and you can set up automated monthly deposits to keep growing your portfolio.
We’ve covered why invest in mutual funds here

Examples of Mutual Funds

Here is an example of some ELSS Funds, which are a type of mutual fund scheme:
Mutual Fund NameCategoryExit Load / Withdrawal Fee
Axis Liquid FundLiquidZero
Aditya Birla Sun Life Corporate Bond FundShort Term DebtZero
Quantum Tax Saving FundEquity Large CapZero
Franklin India Low Duration FundUltra Short Term Debt0.5% if you withdraw in your first 3 months. After that, zero!
Franklin India Focused Equity FundEquity Multi Cap1% if you withdraw in your first year. After that, zero!
Mirae Asset Emerging Bluechip FundEquity Mid Cap1% if you withdraw in your first year. After that, zero!
DSP Blackrock Equity & Bond FundHybrid Equity1% if you withdraw in your first year. After that, zero!
Reliance Tax Saver (ELSS) FundELSSZero

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This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended be advice. You must obtain professional advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax, investment or other professional advice from North Loop or its affiliates. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date. All opinions expressed do not reflect the views of North Loop nor are endorsed by North Loop.