Starting your investment journey can feel overwhelming, especially with so many options in the market. For beginners, mutual funds are one of the easiest and most effective ways to step into investing. They allow you to pool money with other investors, get the benefit of professional fund management, and build a diversified portfolio without having a large capital or deep market knowledge.
But with hundreds of funds available, the real question is—which are the best starter mutual funds for beginners? In this blog, we’ll break down the basics of mutual fund investment for beginners, explain why they are a smart choice, and highlight the best mutual funds to help you get started with confidence.
Understanding Mutual Fund Investment for Beginners
If you’re just starting your investment journey, mutual funds are one of the easiest and safest methods to enter the markets. A mutual fund is an investment instrument that collects money from multiple investors and invests it across assets like equities, debt, or a mix of both.
For beginners, this means you don’t have to worry about selecting individual stocks or bonds—professional fund managers do it for you.
Why are mutual funds good for beginners? The answer is in their simplicity and accessibility. They offer diversification even with a small investment, reduce risk by spreading money across sectors, and are regulated by SEBI, adding a layer of safety.
Before you start, here are a few key terms to know:
- SIP (Systematic Investment Plan): A method of investing small amounts regularly instead of a lump sum.
- NAV (Net Asset Value): The price per unit of the mutual fund, updated daily.
- Expense Ratio: This is the fee that the fund house charges to manage your money.
Why Beginners Should Start with Mutual Funds
For first-time investors, mutual funds solve many common challenges. Here’s why they’re often recommended as the best starter mutual fund option:
- Professional Management: You benefit from the expertise and credibility of fund managers who track markets and manage portfolios.
- Diversification: Even a small investment spreads across multiple securities, reducing overall risk.
- Low Entry Barrier: You can begin investing with as little as ₹500 through the best mutual fund SIP for beginners.
Whether your goal is long-term wealth creation, regular savings, or just getting familiar with investing, mutual funds are among the best mutual funds to invest in for beginners.
Best Starter Mutual Funds for Beginners
When you’re just starting out, picking the right mutual fund can feel tricky. The best starter mutual funds depend on your goals and risk tolerance. Equity funds work well for long-term wealth creation, debt funds are safer for conservative investors, and hybrid funds offer a balance of both.
Here’s a curated list of 10 beginner-friendly mutual funds in India (data as of April 28, 2025):
| Fund Name | Category | AUM (₹ Cr.) | Expense Ratio | 3Y CAGR (%) | 5Y CAGR (%) |
| Quant Small Cap Fund | Equity – Small Cap | 24,892.62 | 0.69% | 21.77 | 49.75 |
| Motilal Oswal Midcap Fund | Equity – Mid Cap | 26,028.34 | 0.64% | 27.99 | 38.88 |
| Nippon India Small Cap Fund | Equity – Small Cap | 55,490.73 | 0.73% | 22.50 | 40.04 |
| Bank of India Credit Risk Fund | Debt – Credit Risk | 110.06 | 0.98% | 5.81 | 27.39 |
| Aditya Birla SL Medium Term Plan | Debt – Medium Duration | 2,206.08 | 0.86% | 15.02 | 14.26 |
| DSP Credit Risk Fund | Debt – Credit Risk | 207.05 | 0.40% | 14.84 | 11.68 |
| Quant Multi Asset Fund | Hybrid – Multi Asset | 3,182.56 | 0.61% | 18.79 | 32.94 |
| HDFC Balanced Advantage Fund | Hybrid – Balanced Advantage | 94,824.34 | 0.88% | 20.48 | 26.71 |
| ICICI Pru Equity & Debt Fund | Hybrid – Aggressive Hybrid | 40,961.70 | 1.00% | 19.35 | 28.08 |
| JM Aggressive Hybrid Fund | Hybrid – Aggressive Hybrid | 767.72 | 0.68% | 22.46 | 29.33 |
Best Mutual Fund SIP Options for Beginners
For many first-time investors, starting small is the smartest way forward. That’s where a Systematic Investment Plan (SIP) comes in. With SIPs, you invest a fixed amount (say ₹500 or ₹1,000) every month into a mutual fund. Over time, this builds discipline and takes away the stress of timing the market.
However, you don’t need to start big. Daily SIP at just ₹11 a day is a perfect entry point for beginners. By investing just ₹11 every day, you can take advantage of daily market fluctuations and enjoy the benefits of compounding, all with minimal financial commitment. This approach makes investing accessible, even for those with limited capital.
Why SIPs Work Well for Beginners
- Rupee Cost Averaging: You buy additional units when prices are low and lesser when prices are high, averaging out your cost.
- Small Ticket Size: You can start investing with as little as ₹500 per month.
- You can start investing with as little as ₹11 a day, making it an easy way to begin your investment journey without a significant upfront cost.
- Discipline in Investing: Automatic deductions make it easy to stay consistent.
- Compounding Effect: The earlier you start, the more your money grows over time. Even investing ₹11 a day can compound significantly over years, helping you build wealth gradually.
Examples of Beginner-Friendly SIP Mutual Funds
Here are some popular funds with SIP options (minimum ₹500 investment):
Here are some popular funds with SIP options that allow you to start with just ₹500 per month (or ₹11 daily investment) as of September 2025:
| Fund Name | Category | AUM (₹ Cr.) | 5Y CAGR (%) | Min. SIP | Expense Ratio |
| ICICI Prudential Infrastructure Fund | Equity – Sectoral (Infra) | 7,645 | 29.34 | ₹500 | 1.14% |
| SBI PSU Fund | Equity – Thematic (PSU) | 5,179 | 29.30 | ₹500 | 0.84% |
| Motilal Oswal Midcap Fund | Equity – Mid Cap | 34,780 | 29.07 | ₹500 | 0.69% |
| HDFC Infrastructure Fund | Equity – Sectoral (Infra) | 2,483 | 28.17 | ₹500 | 1.09% |
| Aditya Birla Sun Life PSU Equity Fund | Equity – Thematic (PSU) | 5,227 | 28.13 | ₹500 | 0.57% |
How to Choose the Best Mutual Fund to Invest for Beginners
Selecting the right fund can feel overwhelming when you’re new, but keeping a few basics in mind makes the process simpler. The best mutual fund to invest in for beginners is one that matches your financial goals, risk tolerance, and time horizon.
Here’s how you can evaluate:
- Match funds with personal goals: If you’re investing for short-term needs (1–3 years), consider debt or hybrid funds. For long-term goals—retirement or wealth creation—equity funds or index funds are more suitable.
- Check fund history: Look at the fund’s performance over at least 3–5 years instead of focusing only on short-term returns.
- Expense ratio: Lower fees mean more of your money stays invested. Always compare expense ratios across similar funds.
- Risk profile: Aggressive investors may lean toward equity funds, while conservative investors may prefer balanced or debt-oriented funds.
Tips for First-Time Mutual Fund Investors
If you’re just starting out, these practical tips will help you make smarter investment decisions and avoid common mistakes:
- Start small and compound gradually: Start with a small SIP amount (₹500–₹1,000) and increase as your confidence and income grow.
- Stay invested for the long term: Mutual funds work best when you give them time to compound. Don’t panic over short-term market swings.
- Avoid frequent switching: Constantly moving between funds eats into returns and prevents compounding. Stick with your chosen plan for a reasonable time.
- Use digital platforms: Online apps and platforms make it easy to start, track, and manage your mutual fund investments.
Did you know?
US ETFs (Exchange Traded Funds) offer a great opportunity for investors looking to diversify their portfolio with international exposure. With Appreciate, you can now access these ETFs easily, benefiting from the growth of US-based companies. Investing in US ETFs can be a strategic way to tap into global markets, adding stability and potential growth to your investment strategy.
FAQs
What are the best mutual funds for beginners to start investing?
Beginners can start with index funds, large-cap funds, or balanced advantage funds. These are less risky compared to small-cap or thematic funds. Options like Nifty 50 index funds or large-cap mutual funds are often considered the best mutual funds for beginners.
Is SIP the right way for beginners to invest in mutual funds?
Yes. Systematic Investment Plans (SIPs) are the best route for beginners. They allow you to start with as little as ₹500 per month, build investing discipline, and benefit from rupee cost averaging over time.
Which mutual fund type is safest for first-time investors?
For safety, beginners should look at large-cap funds, index funds, or hybrid (balanced) mutual funds. These offer stability and diversification while keeping risk lower than mid-cap or sectoral funds.
How much money should a beginner invest in mutual funds?
A beginner can start small: ₹500 to ₹1,000 per month through SIPs is enough. The key is consistency. Once you’re comfortable, you can gradually increase the investment amount based on your income and goals.
Can beginners invest in mutual funds without a Demat account?
Yes. A Demat account is not compulsory for mutual fund investment. You can invest directly through AMC websites, mutual fund apps, or online investment platforms. A Demat account is only needed if you want all your investments (stocks + mutual funds) in one place.
Disclaimer
The information provided in this article is for educational and informational purposes only. It should not be considered as financial or investment advice. Investing in stocks involves risk, and it is important to conduct your research and consult with a qualified financial advisor before making any investment decisions. The author and publisher are not responsible for any financial losses or gains that may result from the use of this information.
