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Mutual funds have become one of India’s most popular investment options, with over 20 crore folios and counting. Yet, misconceptions continue to keep millions of potential investors on the sidelines. If you are self-employed and have been hesitant to start investing because of something you heard from a friend or relative, this article is for you. Let us bust 10 common mutual fund myths once and for all.

Myth 1: Mutual Funds Are Only for Rich People

Reality: You can start a mutual fund SIP with as little as ₹100 per month. Many of India’s most popular funds accept SIPs of ₹500. Whether you are a street vendor, a freelance graphic designer, or a small shop owner, mutual funds are accessible to everyone. Wealth building is not about how much you start with — it is about starting at all.

Myth 2: Mutual Funds Are Very Risky — You Can Lose All Your Money

Reality: Mutual funds invest in diversified portfolios — often 30 to 80 different stocks or bonds. For you to lose all your money, every single company in the portfolio would have to go bankrupt simultaneously, which is virtually impossible. Yes, equity funds can drop 20-30% temporarily during market crashes, but they have always recovered and grown over the long term. And if you want near-zero risk, liquid funds and debt funds exist for exactly that purpose.

Myth 3: You Need to Understand the Stock Market to Invest in Mutual Funds

Reality: The whole point of mutual funds is that a professional fund manager does the research, analysis, and stock picking for you. You do not need to read balance sheets, track quarterly results, or understand technical charts. You just need to know your goal, pick a suitable fund category, and start a SIP. Apps like Bachatt even recommend funds based on your profile, making it even simpler.

Myth 4: A Fund with a Lower NAV Is Cheaper and Better

Reality: This is one of the most common and costly misunderstandings. NAV is not like a stock price — a lower NAV does not mean the fund is “cheap” or a better deal. If you invest ₹10,000 in a fund with NAV ₹10 (getting 1,000 units) and another with NAV ₹100 (getting 100 units), and 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.

Myth 5: SIPs Should Be Stopped During Market Crashes

Reality: This is exactly backwards. When markets crash, your SIP buys more units at lower prices. This is called rupee cost averaging, and it is one of the biggest advantages of SIP investing. Stopping your SIP during a crash means you miss buying at discounted prices. Historically, investors who continued their SIPs through crashes like 2008, 2020, and 2022 earned significantly higher returns than those who stopped.

Myth 6: Past Returns Guarantee Future Performance

Reality: Every mutual fund advertisement includes the disclaimer: “Past performance is not indicative of future results.” Yet investors consistently chase last year’s top-performing fund. A fund that gave 40% returns last year might give -10% this year. Instead of chasing returns, focus on the fund’s consistency over 5-10 years, the quality of its portfolio, and how it performs compared to its benchmark across market cycles.

Myth 7: You Need a Demat Account to Invest in Mutual Funds

Reality: You do not need a demat account for regular mutual fund investments. All you need is to complete your KYC (PAN card, Aadhaar, and bank account). You can invest directly through AMC websites, registrars like CAMS and KFintech, or apps like Bachatt. A demat account is only needed if you want to invest in ETFs (Exchange Traded Funds), which are traded on the stock exchange.

Myth 8: Mutual Funds Are Only for Long-Term Investment

Reality: While equity mutual funds are best suited for 5+ year horizons, debt mutual funds cater to every time frame. Need to park money for a week? Use an overnight fund. For 1-3 months? Use a liquid fund. For 1-3 years? Use a short duration fund. Mutual funds offer solutions for every investment horizon, from one day to thirty years.

Myth 9: More Funds in Your Portfolio Means Better Diversification

Reality: Owning 10 or 15 mutual funds does not necessarily mean better diversification. In fact, it often leads to “diworsification” — many funds end up holding the same stocks, and you just have a complicated portfolio that is hard to track. For most investors, 2-4 well-chosen funds across different categories (large cap, mid cap, debt) provide adequate diversification.

Myth 10: Self-Employed People Cannot Invest in Mutual Funds

Reality: This might be the most harmful myth of all. There is absolutely no income requirement or employment type restriction for mutual fund investing. Whether you are a salaried employee, a business owner, a gig worker, or a homemaker — anyone with a PAN card and bank account can invest. In fact, mutual funds are especially useful for self-employed individuals because SIPs create investment discipline even when income is irregular, and liquid funds provide a better alternative to keeping surplus cash idle in a savings account.

The Bottom Line

Mutual fund myths thrive because financial literacy in India is still growing. The more you educate yourself, the better your financial decisions become. Do not let hearsay and misconceptions stop you from building wealth.

Start Your Myth-Free Investment Journey with Bachatt

Bachatt is designed to make mutual fund investing simple, transparent, and accessible — especially for India’s self-employed. No jargon, no confusing fine print, no myths. Just clear information, smart fund recommendations, and a seamless investing experience. Download Bachatt today and let your money start working as hard as you do.

Life is unpredictable, and for self-employed individuals in India — whether you are a freelancer, shopkeeper, delivery partner, or small business owner — this unpredictability hits harder. A medical emergency, a slow business month, or an unexpected repair can throw your finances off track. That is why an emergency fund is not optional — it is essential. And mutual funds can be a smart way to build one.

What Is an Emergency Fund?

An emergency fund is money kept aside specifically for unexpected expenses or income gaps. It is not for planned purchases, vacations, or investments — it is your financial safety net for genuine emergencies.

How Much Should You Save?

The standard advice is to save 3-6 months of essential expenses. But for self-employed individuals with irregular income, aim for 6-9 months. Here is a simple calculation:

• Monthly essentials: Rent/EMI + groceries + utilities + insurance + minimum loan payments
• Example: If your monthly essentials are ₹25,000, your emergency fund target should be ₹1,50,000 to ₹2,25,000

This buffer ensures you can survive several months without income while you figure things out — without dipping into your long-term investments or taking expensive loans.

Why Not Just Use a Savings Account?

You can, but savings accounts typically earn only 2.5-4% interest. With inflation running at 5-6%, your money actually loses value sitting in a savings account. Mutual funds — specifically low-risk debt funds — can earn 5-7% or more while keeping your money almost as accessible.

Best Mutual Funds for an Emergency Fund

1. Liquid Funds (The Top Choice)

Liquid funds invest in very short-term securities (up to 91 days) and are the safest category of mutual funds. Key benefits:

• Returns of 5-7% per year — better than most savings accounts
• Money can be withdrawn within 24 hours (some offer instant redemption up to ₹50,000)
• No exit load if redeemed after 7 days
• Extremely low volatility — your NAV rarely drops

2. Ultra Short Duration Funds

These invest in slightly longer-term instruments (3-6 months maturity) and can offer marginally better returns than liquid funds:

• Returns of 6-7.5% per year
• Redemption within 1-2 business days
• Very low risk

3. Overnight Funds (For Maximum Safety)

These invest in securities that mature the very next day. Returns are lower (4-5%) but the risk is virtually zero. Good for extremely conservative savers.

How to Build Your Emergency Fund Step by Step

1. Calculate your target: 6-9 months of essential expenses for self-employed individuals.
2. Open a liquid fund: Choose one from a reputed AMC with a good track record. You can do this instantly on Bachatt.
3. Start a SIP: Even ₹2,000-5,000 per month adds up. If your target is ₹1,50,000 and you save ₹5,000 per month, you will build your emergency fund in about 30 months.
4. Add lump sums in good months: When your business does well, put extra money into the liquid fund to reach your target faster.
5. Stop once you hit the target: You do not need to over-save in your emergency fund. Once you reach your target, redirect the SIP to equity funds for wealth building.

Rules for Using Your Emergency Fund

• Only use it for genuine emergencies: Medical bills, urgent repairs, income gaps — not for a new phone or a vacation.
• Replenish after use: If you withdraw ₹30,000 for an emergency, restart your SIP or add a lump sum to bring it back to the target level.
• Keep it separate: Do not mix your emergency fund with your regular investment portfolio. Treat it as a separate, untouchable reserve.

The Two-Bucket Strategy

For self-employed individuals, consider splitting your emergency fund into two buckets:

• Bucket 1 (Instant access): Keep 1-2 months of expenses in your savings account or an overnight fund for immediate access.
• Bucket 2 (Quick access): Keep the remaining 4-7 months in a liquid fund for slightly better returns with 1-day redemption.

This way, you always have instant cash for Day 1 emergencies, while the bulk of your emergency fund earns better returns.

Common Mistakes to Avoid

• Using equity funds for emergency money: Equity funds can drop 20-30% during market crashes — exactly when you might need emergency funds most.
• Not having one at all: Many self-employed individuals skip this step and go straight to investing in stocks or equity funds. Build your safety net first.
• Keeping too much in the emergency fund: Once you reach your target, invest the surplus in growth-oriented funds. Money sitting idle is money losing to inflation.

Build Your Emergency Fund with Bachatt

Bachatt makes it simple to set up and manage your emergency fund. Start a SIP in a liquid fund, track your progress towards your target, and withdraw instantly when you need it. For India’s self-employed, having a solid emergency fund is the foundation of financial freedom. Download Bachatt and start building your safety net today — because emergencies do not wait, and neither should your preparation.

What if you could invest in the entire Indian stock market with one single fund, pay almost nothing in fees, and still beat most professional fund managers over the long term? That is exactly what an index fund does. It is the simplest, most cost-effective way to build wealth — and it is perfect for busy self-employed individuals who do not have time to track the market.

What Is an Index Fund?

An index fund is a type of mutual fund that simply copies a stock market index. Instead of a fund manager actively picking stocks, the fund buys all the stocks in the index in the same proportion.

For example, a Nifty 50 Index Fund buys all 50 stocks in the Nifty 50 index — Reliance, TCS, HDFC Bank, Infosys, and so on — in the exact same weightage as the index. When the Nifty 50 goes up by 1%, your fund also goes up by approximately 1% (minus a tiny fee).

Popular Index Funds in India

• Nifty 50 Index Funds: Track India’s 50 largest companies. The most popular choice for beginners.
• Sensex Index Funds: Track the BSE Sensex (30 largest companies). Similar to Nifty 50 but fewer stocks.
• Nifty Next 50 Index Funds: Track companies ranked 51-100. These are the “next generation” of large caps — slightly more growth-oriented.
• Nifty Midcap 150 Index Funds: Track 150 mid-sized companies. Higher risk and return potential.
• Nifty 500 Index Funds: Track 500 companies across large, mid, and small caps. The broadest market exposure.

Why Are Index Funds So Popular?

1. Extremely Low Cost

Index funds have expense ratios as low as 0.1% to 0.3%. Compare this to actively managed funds that charge 0.5% to 1.5% (Direct Plans). Over 20 years, this difference can mean lakhs of rupees saved in fees.

2. No Fund Manager Risk

With an actively managed fund, you depend on the fund manager’s skill. If they make bad calls, your returns suffer. With an index fund, you are betting on the Indian economy as a whole — not one person’s judgment.

3. Most Active Funds Fail to Beat the Index

Studies consistently show that over 5-10 year periods, 60-80% of actively managed large cap funds in India fail to beat the Nifty 50 index. After accounting for higher fees, index funds often come out ahead.

4. Simplicity

You do not need to research fund managers, compare 50 different schemes, or worry about fund manager changes. Just pick an index, start a SIP, and let it run.

Who Should Invest in Index Funds?

• First-time investors who find the mutual fund universe overwhelming
• Busy self-employed professionals — shopkeepers, freelancers, doctors, consultants — who do not have time to research and track multiple funds
• Long-term investors building retirement or wealth creation portfolios
• Anyone who believes in the India growth story — if India’s economy grows, the index grows, and so does your investment

How to Choose an Index Fund

Since all Nifty 50 index funds track the same index, the main differentiators are:

1. Expense ratio: Lower is better. Even a 0.1% difference matters over decades.
2. Tracking error: How closely the fund mirrors the index. Lower tracking error means the fund is doing its job well.
3. AUM: Larger AUM index funds tend to have lower tracking errors and costs.
4. Fund house reputation: Stick with established AMCs.

A Simple Index Fund Portfolio

For a self-employed investor who wants to keep things simple, here is a two-fund portfolio:

• 70% in Nifty 50 Index Fund: Your stable, core holding
• 30% in Nifty Next 50 Index Fund: A growth kicker with slightly higher risk

Start a SIP in both, increase it when income is good, and let compounding do its magic over 10-20 years.

Common Questions

Can I lose money in index funds? Yes, in the short term. If the market falls, your index fund will fall too. But historically, the Nifty 50 has delivered 11-13% CAGR over 10+ year periods.

Should I invest only in index funds? It depends. Index funds are great as a core holding. You can add actively managed mid/small cap funds for additional growth potential.

Start Your Index Fund SIP with Bachatt

Bachatt makes index fund investing effortless. Browse and compare index funds by expense ratio and tracking error, start a SIP in minutes, and build long-term wealth the simple way. You do not need to be a market expert — the index does the work for you. Download Bachatt and let your money grow while you focus on your business.

Not all mutual funds invest in stocks. Debt mutual funds invest your money in fixed-income instruments like government bonds, corporate bonds, treasury bills, and money market instruments. They are generally safer than equity funds and play a crucial role in every investor’s portfolio — especially for self-employed individuals who need stability alongside growth.

What Are Debt Mutual Funds?

Debt funds lend your money to governments and companies by buying their bonds. In return, these borrowers pay regular interest. The fund earns this interest, and the NAV of the fund gradually increases.

Unlike a fixed deposit where your return is guaranteed, debt fund returns can vary slightly based on interest rate movements and credit quality of the bonds. However, they are significantly less volatile than equity funds.

Types of Debt Mutual Funds

SEBI has defined 16 categories of debt funds. Here are the most relevant ones for everyday investors:

1. Liquid Funds

These invest in very short-term instruments (up to 91 days). They are the safest debt funds and are ideal for parking money you might need within a few weeks or months.

• Expected returns: 5-7% per year
• Risk: Very low
• Best for: Emergency fund, short-term parking of business surplus

2. Ultra Short Duration Funds

These invest in instruments with a maturity of 3-6 months. Slightly better returns than liquid funds with marginally higher risk.

• Expected returns: 6-7.5% per year
• Risk: Low
• Best for: Money needed in 3-6 months

3. Short Duration Funds

These invest in bonds with a maturity of 1-3 years. They offer better returns but are more sensitive to interest rate changes.

• Expected returns: 6.5-8% per year
• Risk: Low to Moderate
• Best for: Goals 1-3 years away, like saving for a vehicle or business expansion

4. Corporate Bond Funds

These invest at least 80% in high-rated (AA+ and above) corporate bonds. They offer decent returns with controlled risk.

• Expected returns: 7-8.5% per year
• Risk: Moderate
• Best for: Medium-term goals with a preference for stability

5. Gilt Funds

These invest exclusively in government securities. There is zero credit risk (the government will not default), but they are sensitive to interest rate movements.

• Expected returns: 7-9% per year
• Risk: Moderate (interest rate risk, not credit risk)
• Best for: Conservative investors looking for government-backed safety over 3+ years

How Do Debt Funds Earn Returns?

Debt funds earn returns in two ways:

1. Interest income: The regular interest paid by the bonds in the portfolio. This is steady and predictable.
2. Capital appreciation: When interest rates fall, existing bonds become more valuable, pushing up the fund’s NAV. The reverse happens when rates rise.

Debt Funds vs Fixed Deposits

Feature	Debt Funds	Fixed Deposits
Returns	6-8% (variable)	6-7.5% (fixed)
Liquidity	High (redeem anytime)	Penalty for early withdrawal
Taxation	Slab rate	Slab rate + TDS
Risk	Low (not guaranteed)	Very low (insured up to ₹5L)

Who Should Invest in Debt Funds?

• Self-employed individuals who need a safe place to park business surplus between contracts or seasonal earnings
• Conservative investors who want better returns than savings accounts without stock market risk
• Anyone building an emergency fund — liquid funds are perfect for this
• Retirees who need stable, regular income
• Investors balancing their portfolio — adding debt funds to an equity portfolio reduces overall volatility

Risks to Be Aware Of

• Credit risk: The company whose bond the fund holds could default. Stick to funds investing in AAA/AA+ rated bonds.
• Interest rate risk: When rates rise, bond prices fall, which can temporarily reduce NAV.
• Not guaranteed: Unlike FDs, debt fund returns are not fixed or insured.

Explore Debt Funds on Bachatt

Bachatt helps you find the right debt fund for your needs — whether you want to park money for a few weeks in a liquid fund or save for a goal 2-3 years away. Our platform shows you credit quality, duration, and returns in simple terms, so you always know exactly where your money is going. Start your debt fund investment on Bachatt today.

One fear that stops many Indians from investing in mutual funds is this: what if the company managing my money shuts down? Will I lose everything? This is an understandable concern, especially for self-employed individuals who have worked hard for every rupee. The good news is that Indian mutual funds have some of the strongest investor protection regulations in the world. Let us understand exactly what happens.

How Is a Mutual Fund Structured?

To understand why your money is safe, you first need to understand the structure. A mutual fund in India involves three separate entities:

1. The AMC (Asset Management Company): This is the company that manages the fund — like HDFC AMC, ICICI Prudential AMC, or SBI Funds Management. They make the investment decisions.
2. The Trustee: An independent body that oversees the AMC and ensures it acts in investors’ interests. Think of them as a watchdog.
3. The Custodian: A separate entity (usually a bank) that physically holds the securities (stocks, bonds) purchased by the fund. The AMC cannot directly access or misuse these assets.

This three-layer structure is the key to your safety. Your money and the securities bought with it are not sitting in the AMC’s bank account. They are held separately by the custodian.

What If the AMC Shuts Down?

If an AMC decides to close its operations or faces financial trouble, here is what happens:

Scenario 1: The AMC Is Acquired by Another AMC

This is the most common outcome. When an AMC wants to exit the business, another AMC takes over all its schemes and investors. Your investments simply continue under the new AMC. You do not need to do anything — your units, NAV, and investment history remain intact.

This has happened several times in India:

• Goldman Sachs AMC was taken over by Reliance (now Nippon India)
• Deutsche AMC was taken over by DHFL Pramerica (now PGIM India)
• JP Morgan AMC was taken over by Edelweiss

In each case, investors’ money remained safe.

Scenario 2: The AMC Winds Up the Scheme

If no buyer is found, SEBI can direct the AMC to wind up its schemes. In this case:

• The fund’s portfolio is sold at market value
• The proceeds are distributed to all unit holders proportionally
• You receive your share of the fund’s assets based on the number of units you hold

Can the AMC Run Away with Your Money?

No. Here is why:

• Custodian holds the assets: The AMC does not have the securities in its own account. A third-party custodian (like CSDL or NSDL) holds them.
• SEBI regulations: SEBI tightly regulates mutual funds. AMCs must follow strict rules on how they invest, report, and manage your money.
• Independent trustees: The board of trustees monitors the AMC. If the AMC acts against investor interests, trustees can take action.
• Regular audits: Mutual fund accounts are audited regularly, and disclosures are mandatory.

What About Market Risk?

It is important to distinguish between two types of risk:

• Institutional risk (AMC shutting down): This is extremely low due to the regulatory framework described above.
• Market risk (value of investments falling): This is real and exists in all market-linked investments. Your fund’s value can go down because the underlying stocks or bonds lose value.

The structure protects you from institutional failure, not from market movements.

Is There Any Insurance?

Unlike bank fixed deposits which are insured up to ₹5 lakh by DICGC, mutual funds do not have deposit insurance. However, the structural separation of assets (custodian holding securities separately) provides a different kind of protection that is arguably more robust — your full investment value is protected, not just ₹5 lakh.

What Should You Do as an Investor?

• Invest in funds from reputable AMCs with large AUM and a long track record
• Diversify across 2-3 AMCs if you want extra peace of mind
• Keep your KYC updated so that any communications about fund changes reach you
• Check your Consolidated Account Statement (CAS) from CAMS or KFintech regularly to verify your holdings

Your Money Is Safe with Bachatt

When you invest through Bachatt, your mutual fund units are held directly in your name with the registrar (CAMS or KFintech) — not with Bachatt. Even if Bachatt were to shut down, your investments remain untouched and accessible. We are a platform that facilitates investing, but your assets are always yours. Invest with confidence, knowing your hard-earned money is protected by India’s robust regulatory framework. Download Bachatt and start building your wealth securely.

Every mutual fund in India publishes a monthly fact sheet — a document that gives you a snapshot of everything important about the fund. But for most beginner investors, fact sheets look like a confusing jumble of numbers, graphs, and jargon. This guide will teach you how to read a fact sheet like a pro, even if you are an absolute beginner.

What Is a Mutual Fund Fact Sheet?

A fact sheet is a 1-2 page summary published every month by the Asset Management Company (AMC). It contains key data about the fund’s performance, portfolio holdings, risk metrics, and charges. SEBI mandates that every fund house publishes this, making it freely available on the AMC’s website.

Key Sections of a Fact Sheet

1. Fund Overview

This section tells you the basics:

• Fund name and category: Is it a large cap, mid cap, flexi cap, or debt fund?
• Benchmark index: The index against which the fund’s performance is compared (e.g., Nifty 50, Nifty Midcap 150)
• Fund manager: Who is managing your money. Experienced managers with a long track record are a positive sign.
• Inception date: When the fund was launched. Older funds have a longer track record to evaluate.
• AUM (Assets Under Management): The total money managed by the fund. Very small AUM (below ₹500 crore for equity funds) might indicate lack of investor confidence.

2. Performance / Returns

This is the section most investors jump to first. It shows returns over different periods:

• 1 month, 3 months, 6 months: Short-term returns — do not give these too much importance
• 1 year, 3 years, 5 years: More meaningful. Compare these with the benchmark index
• Since inception: The overall CAGR since the fund was launched

What to look for: Consistent outperformance against the benchmark over 3-5 years. A fund that beats its benchmark across market cycles is a good sign.

3. Portfolio Composition

This shows where your money is actually invested:

• Top 10 holdings: The biggest stocks or bonds in the portfolio. Check if the fund is overly concentrated in a few stocks.
• Sector allocation: How the fund is spread across sectors like banking, IT, pharma, auto, etc. A well-diversified fund reduces risk.
• Asset allocation: The percentage in equity, debt, and cash. Some cash holding (2-5%) is normal for managing redemptions.

4. Risk Measures

These metrics help you understand the fund’s risk profile:

• Standard deviation: Measures how much the fund’s returns fluctuate. Higher standard deviation means more volatility.
• Beta: Measures how much the fund moves relative to the market. Beta of 1 means it moves exactly like the market; above 1 means more volatile.
• Sharpe ratio: Measures risk-adjusted returns. Higher is better — it means the fund gives more return per unit of risk taken.
• Alpha: The excess return generated by the fund manager over the benchmark. Positive alpha means the manager is adding value.

5. Expense Ratio

The annual fee charged by the fund. Lower is generally better. Check if you are looking at the Direct plan or Regular plan expense ratio — Direct will always be lower.

6. Exit Load

The fee charged if you redeem your investment before a specified period. Typically, equity funds charge 1% if redeemed within 1 year.

7. SIP Returns (if shown)

Some fact sheets include SIP return data showing what a monthly SIP of ₹10,000 would have grown to over different periods. This is useful for self-employed individuals planning regular investments.

Red Flags to Watch For

• Consistent underperformance vs benchmark: If the fund trails its benchmark over 3 and 5 years, the fund manager is not adding value.
• Very high expense ratio: Especially in a regular plan — you might be paying too much in commissions.
• Concentrated portfolio: If the top 5 holdings make up more than 40-50% of the portfolio, the fund is heavily dependent on a few stocks.
• Shrinking AUM: If AUM has been consistently declining, investors may be losing faith in the fund.

Decode Fund Fact Sheets with Bachatt

Reading fact sheets can be overwhelming, but Bachatt simplifies this for you. Our app highlights the key metrics that matter — past performance, risk level, expense ratio, and more — in a clean, easy-to-understand format. You do not need to be a finance expert to make smart investment choices. Bachatt translates the jargon into plain language so you can invest with confidence. Start exploring funds on Bachatt today.

When you start exploring equity mutual funds in India, you will quickly come across terms like large cap, mid cap, and small cap. These categories tell you about the size of companies the fund invests in — and understanding the difference is crucial for picking the right fund for your goals and risk appetite.

What Do Large Cap, Mid Cap, and Small Cap Mean?

SEBI classifies all listed companies by their market capitalisation (total market value of their shares):

• Large cap: The top 100 companies by market capitalisation. These are India’s biggest and most established companies — Reliance, TCS, HDFC Bank, Infosys, ITC.
• Mid cap: Companies ranked 101 to 250. These are growing businesses that are established but still have significant room to expand — companies like Persistent Systems, Indian Hotels, or Coforge.
• Small cap: Companies ranked 251 and below. These are smaller, younger companies with high growth potential but also higher risk.

Large Cap Funds: Stability First

Large cap funds invest at least 80% of their assets in the top 100 companies. Here is what you can expect:

• Returns: 10-14% CAGR over 5+ years historically
• Risk: Moderate — these companies have proven business models and strong financials
• Volatility: Lower compared to mid and small cap funds
• Best for: Conservative investors, those nearing their financial goals, or first-time investors who want a smoother ride

For a self-employed individual who cannot afford to see a large drop in their invested capital — say you might need the money for business expenses — large cap funds offer a more predictable experience.

Mid Cap Funds: The Growth Sweet Spot

Mid cap funds invest at least 65% of their assets in companies ranked 101-250. These funds sit in a sweet spot between stability and growth:

• Returns: 12-18% CAGR over 5+ years historically
• Risk: Moderate to High
• Volatility: Moderate — they can fall more than large caps during market crashes but tend to recover well
• Best for: Investors with a 5-7+ year horizon who are comfortable with some ups and downs

Many of today’s large cap companies were mid caps 10-15 years ago. Investing in mid cap funds is essentially betting on tomorrow’s market leaders.

Small Cap Funds: High Risk, High Reward

Small cap funds invest at least 65% of their assets in companies ranked 251 and below. These are the most volatile but potentially most rewarding category:

• Returns: 14-22% CAGR over 7+ years historically (but with significant variation)
• Risk: High — small companies can fail or face severe business challenges
• Volatility: Very high — during the 2020 crash, some small cap funds fell 40-50%
• Best for: Aggressive investors with a 7-10+ year horizon and strong risk tolerance

A Side-by-Side Comparison

Factor	Large Cap	Mid Cap	Small Cap
Risk	Moderate	Moderate-High	High
Return Potential	10-14%	12-18%	14-22%
Ideal Horizon	3-5+ years	5-7+ years	7-10+ years
Stability	High	Medium	Low

Which Should You Choose?

The answer depends on where you are in your financial journey:

• Just starting out? Begin with a large cap or flexi cap fund. Get comfortable with market movements before venturing into riskier categories.
• Have a long horizon (10+ years)? Allocate a portion to mid and small cap funds for growth, with large caps as your stable core.
• Self-employed with irregular income? Prioritise large cap funds for stability. When you have surplus cash in good months, invest extra into a mid cap fund.

A balanced approach might look like: 50% in large cap, 30% in mid cap, and 20% in small cap — adjusting based on your age and risk appetite.

Build Your Portfolio with Bachatt

Not sure which mix of large, mid, and small cap funds suits you? Bachatt analyses your income pattern, goals, and risk tolerance to recommend the right allocation. Whether you are a cautious saver or an ambitious wealth-builder, Bachatt helps you invest with confidence. Download the app and discover your ideal fund mix today.

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.