Category: Mutual Funds Facts

A Systematic Investment Plan, or SIP, is one of the most powerful tools available to everyday Indian investors. It lets you invest a fixed amount regularly into a mutual fund — building wealth gradually without needing a large lump sum. For self-employed individuals with fluctuating incomes, understanding how to start, modify, and stop a SIP gives you complete control over your financial journey.

What Is a SIP?

A SIP is an automated way to invest in mutual funds. You choose a fund, set an amount (as low as ₹100 or ₹500), pick a date, and the money is automatically debited from your bank account and invested on that date every month.

Think of it as a recurring deposit — but instead of earning a fixed 6-7% interest, your money is invested in the market with the potential to earn 10-15% or more over the long term.

How to Start a SIP

Starting a SIP has become incredibly simple. Here is the step-by-step process:

1. Complete your KYC: You need your PAN card, Aadhaar, and a bank account. KYC can be done online in minutes through platforms like Bachatt.
2. Choose your fund: Based on your goal (retirement, emergency fund, child’s education) and risk appetite, select a mutual fund scheme.
3. Set the SIP amount: Decide how much you can invest monthly. Even ₹500 per month is a great start.
4. Pick the SIP date: Choose the date on which the amount will be debited from your bank account each month. Most investors pick a date right after they typically receive income.
5. Set up auto-debit: Link your bank account via a mandate (eMandate, NACH, or UPI autopay) so the SIP happens automatically.
6. Start investing: Confirm, and your SIP is live!

How to Modify Your SIP

Life changes, and your SIP should change with it. Here are the modifications you can make:

Increase Your SIP Amount

Got a raise or your business did well this quarter? You can increase your SIP amount. Many platforms, including Bachatt, support a step-up SIP feature where your SIP automatically increases by a set percentage each year. Even a ₹500 annual increase can add lakhs to your final corpus.

Decrease Your SIP Amount

If you are going through a lean period — common for self-employed individuals — you can reduce your SIP amount instead of stopping it entirely. Continuing even a small SIP keeps the investment habit alive and ensures you do not miss out on market opportunities.

Change the SIP Date

If your income pattern changes, you can change the SIP debit date to align with when money flows into your account.

Switch to a Different Fund

If you want to move your SIP to a different fund, you can stop the current SIP and start a new one in the desired fund. Your existing investment in the old fund will continue to grow — you do not need to redeem it.

How to Stop or Pause Your SIP

You can stop a SIP at any time without any penalty. Here is what you need to know:

• Stopping a SIP does not mean redeeming your investment. Your existing units remain invested and continue to grow. You simply stop adding new money.
• Pause option: Some platforms allow you to pause a SIP for a few months and resume later — perfect for self-employed individuals during off-season months.
• No exit charges for stopping SIP: There is no penalty for stopping the SIP itself. However, if you redeem your invested units, exit load may apply depending on the fund and holding period.

SIP Tips for Self-Employed Individuals

When your income is irregular, SIP investing requires a slightly different approach:

• Start with a comfortable base amount: Set your SIP at a level you can manage even in your worst month.
• Top up in good months: When business is good, invest extra as a lump sum on top of your SIP.
• Keep 2-3 months of SIP amount as buffer: This ensures your SIP does not bounce even if one month’s income is delayed.
• Use flexi-SIP if available: Some funds allow you to vary your SIP amount each month within a range — perfect for variable incomes.

What Happens If Your SIP Bounces?

If your bank account does not have sufficient balance on the SIP date, the transaction fails. If it bounces three times in a row, the fund house may cancel your SIP. Your bank may also charge a small penalty for a failed auto-debit. To avoid this, maintain a minimum buffer in your account.

Start, Manage, and Grow Your SIP with Bachatt

Bachatt makes SIP management effortless. Start a SIP in under 2 minutes, modify your amount or date anytime, and pause or stop whenever you need to — all from your phone. Designed for India’s self-employed, Bachatt understands that your income may vary, but your wealth-building goals do not have to. Download Bachatt and take charge of your financial future today.

If you have ever compared two mutual funds and wondered why one gives slightly better returns than the other despite investing in similar stocks, the answer often lies in something called the expense ratio. It is a small number that can make a big difference to your wealth over time.

What Is the Expense Ratio?

The expense ratio is the annual fee that a mutual fund charges you for managing your money. It covers the fund house’s operating costs — the fund manager’s salary, administrative expenses, marketing costs, compliance, and more.

It is expressed as a percentage of your total investment. For example, if a fund has an expense ratio of 1.5%, it means for every ₹1,00,000 you invest, ₹1,500 goes towards these charges every year.

Here is the important part: this fee is not deducted separately from your bank account. It is adjusted daily from the fund’s NAV (Net Asset Value). So when you see a fund’s return, the expense ratio has already been deducted.

Why Does the Expense Ratio Matter?

Let us understand with a simple example. Suppose you invest ₹10,000 per month for 20 years in two identical funds — Fund A with a 0.5% expense ratio and Fund B with a 1.5% expense ratio. Assuming both earn 12% gross returns:

• Fund A (0.5% expense ratio): Your corpus grows to approximately ₹98 lakh
• Fund B (1.5% expense ratio): Your corpus grows to approximately ₹85 lakh

That 1% difference in expense ratio costs you nearly ₹13 lakh over 20 years! For self-employed individuals building a retirement corpus with hard-earned irregular income, every rupee counts.

What Is a Good Expense Ratio?

SEBI (Securities and Exchange Board of India) has set upper limits on expense ratios based on fund size. Generally:

• Index funds and ETFs: 0.1% to 0.5% — these are the cheapest because there is no active management
• Direct plan equity funds: 0.5% to 1.5%
• Regular plan equity funds: 1.0% to 2.25%
• Debt funds: 0.1% to 1.0%

As a rule of thumb, lower is better — but not always. A fund with a slightly higher expense ratio may still outperform if the fund manager consistently delivers superior stock picks.

Direct Plans vs Regular Plans: The Expense Ratio Gap

One of the easiest ways to reduce your expense ratio is to invest in Direct Plans instead of Regular Plans. Regular plans include a distributor commission (typically 0.5% to 1%), which inflates the expense ratio. Direct plans eliminate this commission entirely.

If you are a freelancer or small business owner managing your own finances, choosing Direct Plans through a platform like Bachatt is a straightforward way to keep more of your returns.

How to Check the Expense Ratio

Every mutual fund is required to disclose its expense ratio. You can find it:

1. On the fund’s fact sheet (published monthly)
2. On the AMC’s website under scheme details
3. On investment platforms like Bachatt, where it is displayed alongside fund details
4. On AMFI’s website (amfiindia.com)

Does Expense Ratio Change?

Yes, the expense ratio is not fixed forever. It can change based on the fund’s total assets under management (AUM). As a fund grows larger, SEBI mandates that the expense ratio should come down. Fund houses can also voluntarily reduce it.

Expense Ratio for Self-Employed Investors

If you are self-employed with irregular income — perhaps a shopkeeper, cab driver, freelance designer, or consultant — you are likely investing smaller amounts through SIPs. In such cases, a high expense ratio eats into your returns disproportionately. Choosing low-cost index funds or Direct Plans ensures that your hard-earned money works harder for you.

Key Takeaways

• Expense ratio is the annual fee charged by the fund — lower is generally better
• Even a 1% difference compounds into lakhs over 10-20 years
• Always choose Direct Plans to avoid paying distributor commissions
• Index funds have the lowest expense ratios
• Check the expense ratio before investing — it is mentioned in every fund’s fact sheet

Invest Smarter with Bachatt

Bachatt offers only Direct Plans, ensuring you always get the lowest possible expense ratio. Our platform clearly shows the expense ratio for every fund, helping you make informed decisions. Whether you earn ₹15,000 or ₹1,50,000 a month, every paisa saved on fees is a paisa that compounds for your future. Download Bachatt and start your low-cost investing journey today.

You invested in a mutual fund and now you want to withdraw your money. But wait — there might be a charge called “exit load” that reduces your redemption amount. Let us understand what it is and how to avoid it.

What Is Exit Load?

Exit load is a fee charged by the mutual fund company when you redeem (sell) your units before a specified period. It is expressed as a percentage of your redemption value.

Example: A fund has a 1% exit load if redeemed within 1 year. If you invest ₹1,00,000 and it grows to ₹1,10,000 in 6 months, and you redeem:

• Exit load: 1% of ₹1,10,000 = ₹1,100
• You receive: ₹1,10,000 – ₹1,100 = ₹1,08,900

Why Do Funds Charge Exit Load?

Exit loads serve two main purposes:

1. Discourage short-term trading: Mutual funds are designed for long-term investing. Exit loads discourage investors from treating them like short-term bets.
2. Protect other investors: When one investor redeems suddenly, the fund manager may need to sell securities at unfavourable prices. Exit load compensates the fund for this impact.

Typical Exit Load by Fund Type

• Equity funds: Usually 1% if redeemed within 1 year, nil after 1 year
• ELSS funds: No exit load (but mandatory 3-year lock-in)
• Debt funds: Varies — some have no exit load, others charge 0.25-1% for early redemption
• Liquid funds: Graded exit load for first 7 days, nil after 7 days
• Overnight funds: No exit load
• Index funds: Usually 0.25% if redeemed within 15 days, nil after

Exit Load for SIP Investments

This is an important point. For SIPs, each instalment is treated separately for exit load calculation. The exit load period starts from the date of each individual SIP instalment, not from when you started the SIP.

Example: You start a SIP in January 2025 in a fund with 1% exit load for 1 year. If you redeem all units in August 2025:

• January instalment: 7 months old → 1% exit load applies
• February instalment: 6 months old → 1% exit load applies
• …and so on for each month

If you redeem in February 2026:

• January 2025 instalment: 13 months old → No exit load
• February 2025 onwards: Still within 1 year → Exit load applies

How to Avoid Paying Exit Load

1. Hold for the specified period: Most equity funds have zero exit load after 1 year. Simply stay invested.
2. Choose funds with no exit load: Liquid funds (after 7 days) and overnight funds have no exit load.
3. Plan your redemptions: If you know you need money soon, invest in funds with shorter or no exit load periods.
4. Use the FIFO method: Funds sell your oldest units first. If your oldest units have crossed the exit load period, those will be redeemed without charge.

Exit Load vs Expense Ratio

Do not confuse exit load with expense ratio:

• Exit load: One-time charge at redemption (if applicable)
• Expense ratio: Annual ongoing charge deducted from fund returns daily

Check Exit Loads on Bachatt

Before investing in any fund on Bachatt, you can see the exit load details clearly mentioned on the fund page. Our app also shows you which of your existing units have crossed the exit load period, helping you make tax-efficient and cost-efficient redemption decisions.

Albert Einstein reportedly called compound interest the eighth wonder of the world. Whether or not he actually said it, the power of compounding is real, and it can transform your financial future — if you give it enough time.

What Is Compounding?

Compounding is when your returns earn returns. Your initial investment earns a return. Next year, that return also earns a return. And so on, creating a snowball effect.

Simple example:

• Year 1: Invest ₹1,00,000 at 12% → Grows to ₹1,12,000
• Year 2: ₹1,12,000 at 12% → Grows to ₹1,25,440 (you earned ₹13,440 this year, not ₹12,000)
• Year 3: ₹1,25,440 at 12% → Grows to ₹1,40,493
• Year 10: Grows to ₹3,10,585
• Year 20: Grows to ₹9,64,629
• Year 30: Grows to ₹29,95,992

Your ₹1 lakh became nearly ₹30 lakh in 30 years without adding a single rupee more. That is the magic of compounding.

Why Time Matters More Than Amount

Here is a story of three friends to illustrate this:

Priya (starts at 25): Invests ₹5,000/month for 10 years (age 25-35), then stops. Total invested: ₹6 lakh.

Rahul (starts at 35): Invests ₹5,000/month for 25 years (age 35-60). Total invested: ₹15 lakh.

Amit (starts at 35): Invests ₹10,000/month for 25 years (age 35-60). Total invested: ₹30 lakh.

Assuming 12% annual returns, at age 60:

• Priya: ₹1.58 crore (invested only ₹6 lakh!)
• Rahul: ₹95 lakh (invested ₹15 lakh)
• Amit: ₹1.90 crore (invested ₹30 lakh)

Priya invested the least (₹6 lakh vs Amit’s ₹30 lakh) but ended up with a comparable amount. How? Because she started 10 years earlier, giving compounding more time to work.

The Rule of 72

Want a quick way to know how long it takes to double your money? Divide 72 by your expected annual return.

• At 12% return: 72/12 = 6 years to double
• At 8% return: 72/8 = 9 years to double
• At 15% return: 72/15 = 4.8 years to double

This is why equity mutual funds (averaging 12-15% returns) are so powerful for long-term wealth creation compared to FDs (6-7%) or savings accounts (3-4%).

How SIP Supercharges Compounding

A SIP adds a new layer to compounding. Each monthly investment starts its own compounding journey. Your first SIP instalment compounds for the longest, while each subsequent instalment adds to the snowball.

A ₹5,000 monthly SIP at 12% return grows to:

• 5 years: ₹4.12 lakh
• 10 years: ₹11.62 lakh
• 20 years: ₹49.96 lakh
• 30 years: ₹1.76 crore

Notice how the growth accelerates — it took 20 years to reach ₹50 lakh, but only 10 more years to go from ₹50 lakh to ₹1.76 crore. That is compounding in action.

Common Mistakes That Kill Compounding

1. Starting late: Every year you delay costs you significantly more than you think.
2. Breaking the chain: Stopping your SIP during market downturns interrupts compounding.
3. Frequent withdrawals: Taking money out resets the compounding clock.
4. Switching funds too often: Every switch may trigger taxes, reducing your compounding base.

Start Your Compounding Journey with Bachatt

The best time to start investing was 10 years ago. The second-best time is now. Open your Bachatt account today, set up a SIP with as little as ₹100, and let compounding do the heavy lifting for your financial future.

With thousands of mutual fund schemes available in India, choosing the right one can feel like finding a needle in a haystack. But here is the truth — you do not need the “best” fund. You need the “right” fund for YOUR goal.

Step 1: Define Your Goal

Every investment should be linked to a goal. Ask yourself: What am I saving for?

• Emergency fund: 3-6 months of expenses, needed any time
• Vacation: ₹2 lakh needed in 1 year
• Bike or car: ₹3-5 lakh needed in 2-3 years
• Home down payment: ₹15-20 lakh needed in 5 years
• Children’s education: ₹30 lakh needed in 15 years
• Retirement: ₹2 crore needed in 25 years

Step 2: Match the Time Horizon to Fund Type

This is the most important step. Your time horizon determines the type of fund you should choose:

Less than 1 year: Liquid / Overnight Funds

These are the safest mutual funds. They invest in very short-term instruments and give returns slightly better than a savings account (4-6% per year). Use them for emergency funds or money you might need any time.

1-3 years: Short Duration / Ultra Short Duration Debt Funds

These invest in bonds with short maturities. They offer 6-8% returns with low risk. Good for goals like saving for a vacation or building a car down payment.

3-5 years: Hybrid / Balanced Funds

These mix stocks and bonds, giving you equity growth potential with debt stability. Returns of 8-12% are typical. Suitable for medium-term goals like a home down payment.

5-10 years: Large Cap / Flexi Cap / Index Funds

With a longer time frame, you can take on more equity exposure. These funds invest in quality stocks and can deliver 10-14% returns over 5+ years. Market fluctuations matter less over longer periods.

10+ years: Mid Cap / Small Cap / Aggressive Equity Funds

For very long-term goals like retirement, you can afford to invest in higher-risk, higher-return categories. Mid and small cap funds can deliver 14-18% returns but with significant volatility. The long time horizon smoothens out the bumps.

Step 3: Assess Your Risk Tolerance

Be honest with yourself:

• Conservative: You cannot sleep if your investment drops 10%. → Choose debt or hybrid funds.
• Moderate: You can handle 15-20% drops knowing markets recover. → Choose large cap or flexi cap funds.
• Aggressive: You are comfortable with 30%+ drops for higher long-term returns. → Choose mid cap or small cap funds.

Step 4: Check These Key Metrics

• Expense ratio: Lower is better. Direct plans have lower expense ratios.
• Fund manager track record: How has the manager performed across market cycles?
• Consistency: A fund that consistently beats its benchmark is better than one with one great year and four bad ones.
• AUM (Assets Under Management): Very large or very small AUM can be a concern.

Step 5: Keep It Simple

A common beginner mistake is owning too many funds. This leads to overlap (multiple funds holding the same stocks) and makes tracking difficult. For most people, 2-4 funds are enough to cover all goals.

Let Bachatt Choose for You

Still confused? Bachatt’s AI engine takes your goals, income, risk profile, and time horizon as inputs and recommends the perfect fund for each goal. It is like having a personal financial advisor, but on your phone. Simple, smart, and free.

Understanding how your mutual fund returns are taxed is essential for effective financial planning. Many investors are surprised at tax time because they did not factor in the tax impact. This guide simplifies mutual fund taxation in India as per the latest 2025 rules.

Two Types of Capital Gains

When you sell your mutual fund units at a profit, the gain is called a capital gain. This is classified into two types based on how long you held the investment:

Short-Term Capital Gains (STCG)

If you sell your equity mutual fund units within 12 months of purchase, the gains are short-term.

Long-Term Capital Gains (LTCG)

If you sell your equity mutual fund units after 12 months, the gains are long-term.

Tax Rates for Equity Mutual Funds

This includes equity funds, ELSS, hybrid equity-oriented funds, and index funds:

• STCG (held less than 12 months): Taxed at 20%
• LTCG (held more than 12 months): Gains up to ₹1.25 lakh per year are tax-free. Gains above ₹1.25 lakh are taxed at 12.5%

Tax Rates for Debt Mutual Funds

For debt funds, liquid funds, and other non-equity funds:

• All gains: Taxed at your income tax slab rate, regardless of holding period

This change was introduced in the 2023 Budget and makes debt funds less tax-efficient than before.

Tax on Hybrid Funds

Hybrid funds are taxed based on their equity allocation:

• Equity-oriented (65%+ in equity): Taxed like equity funds
• Debt-oriented (less than 65% in equity): Taxed like debt funds

Tax on SIP Investments

This is where it gets slightly tricky. Each SIP instalment is treated as a separate investment. So each monthly SIP has its own purchase date and its own holding period.

Example: You start a SIP in January 2024. When you redeem in March 2025:

• January 2024 instalment: Held for 14 months → LTCG
• February 2024 instalment: Held for 13 months → LTCG
• March 2024 instalment: Held for 12 months → LTCG
• April 2024 onwards: Held less than 12 months → STCG

Most fund houses follow a FIFO (First In, First Out) method — the oldest units are sold first.

How to Minimise Mutual Fund Tax

1. Hold equity funds for more than 12 months: This way, gains up to ₹1.25 lakh per year are completely tax-free.
2. Harvest gains annually: If your LTCG is approaching ₹1.25 lakh, consider redeeming and reinvesting to reset your purchase price.
3. Use ELSS for Section 80C: Get tax deduction on investment and potentially tax-free gains.
4. Stagger your redemptions: Spread your selling across financial years to utilise the ₹1.25 lakh exemption each year.

TDS on Mutual Funds

Good news — there is no TDS (Tax Deducted at Source) on mutual fund redemptions for resident Indians. You need to self-report and pay tax when filing your ITR.

Track Your Tax Liability with Bachatt

Bachatt automatically calculates your capital gains and helps you plan tax-efficient redemptions. Our app shows you which units qualify for LTCG and helps you harvest gains optimally. Smart investing includes smart tax planning — and Bachatt makes it effortless.

When you go to invest in a mutual fund, you will notice two options: Direct Plan and Regular Plan. They are the same fund, managed by the same fund manager, investing in the same stocks — but one can give you significantly more money over time. Let us understand why.

What Is a Regular Plan?

A Regular Plan is when you invest in a mutual fund through an intermediary — a distributor, agent, or bank. The mutual fund company pays a commission to this intermediary for bringing you as a customer.

This commission is not charged to you separately. Instead, it is embedded in the fund’s expense ratio, which means the fund’s returns are slightly lower.

What Is a Direct Plan?

A Direct Plan is when you invest directly with the mutual fund company or through a platform like Bachatt that does not charge distributor commissions. Since there is no intermediary commission, the expense ratio is lower, and your returns are higher.

The Expense Ratio Difference

The typical difference in expense ratio between Regular and Direct plans is 0.5% to 1.5% per year. This might sound small, but over long periods, it makes a massive difference.

The Impact on Your Money

Let us say you invest ₹10,000 per month for 25 years. Assume the fund returns 12% (Direct) vs 11% (Regular — just 1% less due to higher expense ratio):

• Direct Plan: ₹1.90 crore
• Regular Plan: ₹1.58 crore
• Difference: ₹32 lakh!

That extra 1% per year cost you ₹32 lakh over 25 years. This is why choosing Direct Plans matters.

Why Do Regular Plans Still Exist?

Regular plans serve a purpose for investors who need hand-holding, personalised advice, and cannot manage their investments on their own. The commission pays for this service.

However, with platforms like Bachatt that offer guidance, recommendations, and portfolio management at zero commission, the case for Regular Plans has weakened significantly.

How to Tell If You Are in Direct or Regular?

Check the fund name in your portfolio:

• Direct: “HDFC Mid Cap Opportunities Fund – Direct Plan”
• Regular: “HDFC Mid Cap Opportunities Fund – Regular Plan” or simply “HDFC Mid Cap Opportunities Fund”

Can You Switch from Regular to Direct?

Yes, you can! However, switching is treated as a redemption from the Regular Plan and a new purchase in the Direct Plan. This means:

• You may have to pay exit load (if applicable)
• Capital gains tax may apply on the redemption
• New lock-in period applies for ELSS funds

Despite these costs, switching to Direct is usually beneficial for long-term investments because the savings in expense ratio will far outweigh the one-time tax.

The Bottom Line

If you are comfortable investing online and do not need a personal agent, always choose Direct Plans. The lower expense ratio means more money stays in your pocket. Over 20-30 years, this difference can amount to lakhs of rupees.

Invest in Direct Plans with Bachatt

Bachatt offers only Direct Plans, ensuring you get maximum returns from your mutual fund investments. Combined with our AI-powered recommendations and simple interface, you get the best of both worlds — expert guidance and zero commission. Start investing smarter today.

If you have ever looked at a mutual fund, you would have seen a number called NAV. It is one of the most fundamental concepts in mutual fund investing, yet many investors do not fully understand it. Let us break it down.

What Is NAV?

NAV stands for Net Asset Value. It represents the per-unit price of a mutual fund scheme. Think of it as the “price” of one unit of the fund.

Formula: NAV = (Total Assets – Total Liabilities) / Total Number of Units

For example, if a mutual fund has total assets worth ₹100 crore, liabilities of ₹1 crore, and 10 crore units outstanding, the NAV would be: (100 – 1) / 10 = ₹9.90 per unit.

How Is NAV Calculated?

Mutual fund companies (called AMCs — Asset Management Companies) calculate NAV at the end of every business day. Here is what goes into it:

• Market value of all stocks, bonds, and other securities the fund holds
• Plus: Any dividends or interest received
• Minus: Fund expenses (management fees, operating costs)
• Divided by: Total number of units held by all investors

When you place a buy or sell order for a mutual fund, you get the NAV of that day (if ordered before the cut-off time, usually 3:00 PM for equity funds).

Does a Lower NAV Mean a Better Fund?

This is one of the biggest misconceptions in mutual fund investing. No, a lower NAV does not mean the fund is cheaper or better.

Here is why: Suppose Fund A has a NAV of ₹10 and Fund B has a NAV of ₹100. If you invest ₹10,000:

• Fund A: You get 1,000 units
• Fund B: You get 100 units

If both funds grow by 10%, your investment in both becomes ₹11,000. The number of units does not matter — what matters is the percentage return.

A fund with NAV of ₹500 that has been around for 20 years may be a much better performer than a new fund with NAV of ₹10.

NAV and Your SIP

When you invest through a SIP, you buy units at different NAVs each month. In months when the NAV is lower (market is down), your SIP buys more units. When NAV is higher, it buys fewer units. This is rupee cost averaging in action.

Example:

• Month 1: NAV ₹50, SIP ₹5,000 → 100 units
• Month 2: NAV ₹40, SIP ₹5,000 → 125 units
• Month 3: NAV ₹60, SIP ₹5,000 → 83.33 units

Total invested: ₹15,000. Total units: 308.33. Average cost per unit: ₹48.65 (lower than the simple average NAV of ₹50).

When Is NAV Important?

• Buying units: Your purchase price is based on the day’s NAV
• Selling units: Your redemption value is NAV × number of units
• Tracking performance: NAV growth over time shows how well the fund has performed

NAV Cut-Off Times

SEBI has set specific cut-off times for mutual fund transactions:

• Equity and hybrid funds: Orders before 3:00 PM get the same day’s NAV
• Debt funds: Orders before 3:00 PM with same-day fund realization get that day’s NAV
• Orders after cut-off: Get the next business day’s NAV

Track Your NAV with Bachatt

The Bachatt app shows you real-time NAV for all your mutual fund holdings. You can see how many units you own, at what average NAV you bought them, and your current returns — all in a simple, clean dashboard.

Starting your mutual fund journey can feel overwhelming — there are over 2,500 mutual fund schemes in India! But as a beginner, you only need to know about a handful of fund types to get started.

What Should Beginners Look For?

Before picking a fund, consider these factors:

• Your goal: Are you saving for 1 year, 5 years, or 20 years?
• Risk tolerance: Can you handle a 20% drop in value without panicking?
• Investment amount: How much can you invest monthly?
• Tax implications: Do you need tax-saving benefits?

Top Fund Categories for Beginners

1. Large Cap Funds

These invest in India’s biggest and most stable companies — think Reliance, TCS, HDFC Bank, Infosys. They offer relatively stable returns with lower risk compared to small or mid cap funds.

Best for: Conservative investors starting their first SIP.
Expected returns: 10-14% per year over 5+ years.
Risk level: Moderate

2. Index Funds (Nifty 50 / Sensex)

These simply replicate a market index like Nifty 50. They have very low expense ratios (fees) because there is no active fund manager making decisions.

Best for: Beginners who want simplicity and low costs.
Expected returns: 10-13% per year over 5+ years.
Risk level: Moderate

3. Flexi Cap Funds

These can invest in large, mid, and small cap stocks. The fund manager has flexibility to shift between categories based on market conditions.

Best for: Investors comfortable with moderate risk who want diversification.
Expected returns: 12-16% per year over 5+ years.
Risk level: Moderate to High

4. Hybrid Funds (Balanced Advantage)

These invest in both stocks and bonds, automatically adjusting the mix based on market valuations. When markets are expensive, they shift more to bonds; when cheap, more to stocks.

Best for: Risk-averse beginners who want equity exposure but with a safety net.
Expected returns: 9-12% per year over 5+ years.
Risk level: Low to Moderate

5. ELSS Funds (Tax Saving)

If you need to save tax under Section 80C, ELSS is a no-brainer. It has the shortest lock-in (3 years) among all 80C options and offers equity-like returns.

Best for: Anyone with tax liability.
Expected returns: 12-15% per year over 5+ years.
Risk level: Moderate to High

How Many Funds Should a Beginner Have?

Less is more. Start with 1-2 funds. A simple portfolio could be:

• Option A: One Nifty 50 Index Fund (simple and effective)
• Option B: One Large Cap + One Flexi Cap Fund
• Option C: One Balanced Advantage Fund (if you want automatic risk management)

You do not need 10 different funds — that is over-diversification and makes tracking difficult.

Mistakes Beginners Should Avoid

1. Chasing past returns: Last year’s top performer may not repeat.
2. Stopping SIP during market falls: This is the worst time to stop — you are buying units at a discount!
3. Checking returns daily: Mutual funds are for the long term. Check quarterly at most.
4. Investing without a goal: Always link your SIP to a specific goal.

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When you look at mutual fund performance, you will see terms like CAGR, XIRR, and absolute returns. These numbers can be confusing, but understanding them is crucial to knowing how well your investments are really doing.

Absolute Returns: The Simplest Measure

Absolute return tells you the total percentage gain or loss on your investment, without considering time.

Formula: ((Current Value – Invested Amount) / Invested Amount) × 100

Example: You invested ₹1,00,000 and it is now worth ₹1,50,000. Your absolute return is 50%.

The problem? This does not tell you how long it took. A 50% return in 2 years is very different from 50% in 10 years.

CAGR: Annualised Growth Rate

CAGR (Compound Annual Growth Rate) tells you the rate at which your investment grew per year, assuming it grew at a steady rate.

Example: If you invested ₹1,00,000 and it became ₹1,50,000 in 3 years, the CAGR is approximately 14.47% per year.

CAGR is great for comparing lump sum investments over the same time periods. Most mutual fund fact sheets show 1-year, 3-year, and 5-year CAGR.

When to use CAGR: For lump sum investments where you put money in once and track its growth.

XIRR: The Real SIP Return

If you invest via SIP, CAGR does not give you the accurate picture because you are making multiple investments at different times. This is where XIRR (Extended Internal Rate of Return) comes in.

XIRR considers every individual SIP instalment and its date to calculate your actual annualised return.

Example: You run a SIP of ₹5,000 per month for 3 years. Each instalment enters the market on a different date and at a different NAV. XIRR calculates the single annualised return that accounts for all these different entry points.

When to use XIRR: For SIP investments or any investment with multiple cash flows at different dates.

Which Return Metric Should You Use?

• Absolute returns: Use for investments held less than 1 year
• CAGR: Use for lump sum investments held more than 1 year
• XIRR: Use for SIPs and investments with multiple transactions

Common Mistakes to Avoid

Mistake 1: Comparing absolute returns of funds held for different durations. A fund with 80% absolute return over 5 years may have performed worse than a fund with 40% return over 2 years.

Mistake 2: Using CAGR for SIP returns. CAGR assumes a single investment, so it understates your SIP returns when markets have been volatile.

Mistake 3: Ignoring the time period. A 25% CAGR over 1 year is less reliable than a 15% CAGR over 10 years.

How to Check Your Returns

On the Bachatt app, you can see your portfolio’s XIRR and absolute returns in real-time. Our dashboard breaks down performance for each fund and your overall portfolio, making it easy to track how your money is growing.

The Bottom Line

Do not get confused by return numbers. For your SIP investments, look at XIRR. For lump sum, look at CAGR. And always compare returns over similar time periods. With Bachatt, tracking your mutual fund performance is simple and transparent.