Dividends and Interest Income
The scheme earns dividends from the shares it holds and interest from the bonds it holds. Depending on the plan you choose, this income is either paid out to you or reinvested into the scheme.
Invest in over 1,000 mutual fund schemes across Equity, Debt, Hybrid, Gold and ELSS categories through DhanTarang, an AMFI-registered Mutual Fund Distributor (ARN-343986). Start a SIP from ₹500 a month, compare schemes side by side, and track every investment in one portfolio view.
A Mutual Fund is a professionally managed investment vehicle that pools money from many investors and invests it in a diversified portfolio of stocks, bonds, commodities or other securities. Each investor owns units of the fund, and the value of those units rises or falls with the value of the underlying portfolio. In India, Mutual Funds are regulated by SEBI and assets are managed by Asset Management Companies (AMCs).
Mutual Funds let individual investors access markets that would otherwise need more time, capital or research than most people have. A single Equity Mutual Fund may hold shares in forty or fifty companies, which means a ₹500 monthly SIP buys a spread of holdings.
Over the past two decades, Mutual Funds have become one of the most widely used routes to long-term wealth creation in India, particularly through Systematic Investment Plans (SIPs), which invest a fixed amount every month regardless of market level.
You invest money in a scheme and receive units at the current Net Asset Value (NAV). The Asset Management Company invests the pooled money according to the scheme objective, and a fund manager decides what the scheme buys and sells. Your returns come from three sources:
The scheme earns dividends from the shares it holds and interest from the bonds it holds. Depending on the plan you choose, this income is either paid out to you or reinvested into the scheme.
When the fund sells a security for more than it paid, the profit forms part of the scheme value and is passed on to unit holders.
As the securities held by the scheme rise in value, the NAV of each unit rises. You realise this gain when you redeem your units.
Mutual Funds in India are grouped by what they invest in. The category decides the risk you carry and the time frame the scheme suits.
| Fund Type | What It Invests In | Risk | Typically Suits |
|---|---|---|---|
| Equity Mutual Funds | Mainly shares of listed companies | High | Long-term goals, 3–5 years or more |
| Debt Mutual Funds | Government securities, corporate bonds and money market instruments | Low to moderate | Short to medium-term goals, income stability |
| Hybrid Funds | A mix of equity and debt in defined proportions | Moderate | Investors who want growth with a cushion |
| ELSS (Tax-Saving Funds) | Mainly equity, with a 3-year lock-in | High | Section 80C tax saving with growth potential |
| Index Funds and ETFs | The securities of an index, in the same weights | Market-linked | Low-cost, passive long-term investing |
| Liquid and Overnight Funds | Very short-maturity debt instruments | Low | Parking money for days or weeks |
A SIP invests a fixed amount on a fixed date every month. A lump sum invests the whole amount at once. Both are good in different situations — the right choice depends on how much investible income you have today.
| Comparison point | SIP (Systematic Investment Plan) | Lump Sum |
|---|---|---|
| How you invest | A fixed amount every month, debited automatically | The full amount in one transaction |
| Minimum amount | From ₹500 a month in most schemes | Usually ₹1,000 to ₹5,000 depending on the scheme |
| Market timing | Not required — you buy across high and low levels | You carry the risk of entering at a high level |
| Suits | Salaried investors with a monthly surplus | A bonus, maturity proceeds or an existing corpus |
| Discipline | Automatic, so investing does not depend on remembering | Depends entirely on the investor's action |
Many investors use both — a monthly SIP for regular savings, and a lump sum whenever a larger amount becomes available. Use our SIP Calculator to see what a monthly amount could build over your time frame.
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Mutual Funds work for first-time investors and experienced ones for the same set of reasons.
Your money is managed by qualified fund managers who make decisions based on research and market analysis. A ₹500 SIP gets the same management as a large investment in the same scheme.
A scheme holds many securities across sectors, so weakness in one holding has a limited effect on the whole portfolio. Building that spread on your own would take far more capital.
Because schemes transact in large volumes, brokerage and transaction costs per investor stay low, and that benefit is passed on to unit holders.
Open-ended scheme units can normally be redeemed on any business day at the prevailing NAV, with proceeds credited to your bank account within T+2 working days. ELSS funds are the exception, with a 3-year lock-in.
Most schemes accept SIPs from ₹500 a month. You can raise the amount with a Step-Up SIP as your income grows, and pause or stop at any time.
The Mutual Fund industry is regulated by SEBI, and the business follows the rules and code of conduct of AMFI. AMCs publish the NAV daily, and disclose the full portfolio and expense ratio every month.
This is the comparison most first-time investors in India are actually making. The honest difference is certainty against growth potential.
| Comparison point | Mutual Funds | Fixed Deposits |
|---|---|---|
| Returns | Market-linked, not fixed or assured | Fixed and known at the time of deposit |
| Risk | Varies by category, from low to high | Low |
| Liquidity | Redeemable on any business day in open-ended schemes | Premature withdrawal usually carries a penalty |
| Minimum amount | From ₹500 a month through a SIP | Usually from ₹1,000, as a lump sum |
| Best suited to | Long-term investment and growth | Capital protection and short, certain time frames |
Mutual Funds suit almost any investor, but the category that fits depends on your goal and how long you can stay invested.
A SIP in a Hybrid or Index Fund is a common starting point — small amounts, automatic investing, and no need to pick individual stocks.
A long runway makes Equity Funds workable, and a Step-Up SIP lets the amount grow with your salary rather than staying fixed for a decade.
A child's education, a home, a vacation or retirement. The time frame and risk appetite decide the category — Debt or Hybrid for shorter goals, Equity for longer ones.
Mutual Funds are used to balance a wider portfolio, add exposure to sectors or market caps not otherwise held, or park money in Liquid Funds between decisions.
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How your Mutual Fund gains are taxed depends on the category of the scheme and how long you stay invested. Tax applies when you redeem units, not while you hold them.
| Scheme Type | Short-Term Gains | Long-Term Gains |
|---|---|---|
| Equity-oriented schemes | Held under 12 months — taxed at 20% | Held 12 months or more — taxed at 12.5% on gains above ₹1.25 lakh in a financial year |
| Debt-oriented schemes | Added to your income and taxed at your slab rate | Added to your income and taxed at your slab rate |
| ELSS (Tax-Saving Funds) | Not applicable — 3-year lock-in applies | Taxed as an Equity scheme. Investment qualifies for deduction under Section 80C in the old tax regime |
Tax rules change from time to time and depend on your personal circumstances. Please consult a qualified tax professional before making a decision based on tax treatment.
A Mutual Fund is a pool of money collected from many investors and invested by a professional fund manager in a mix of shares, bonds, gold or other securities. You buy units of the fund, and the value of your units moves with the value of what the fund holds. In India, Mutual Funds are regulated by SEBI.
Most schemes allow a SIP from ₹500 a month, and some from ₹100. A lump-sum investment usually starts from ₹1,000 to ₹5,000 depending on the scheme. There is no upper limit, and you can increase your SIP later using a Step-Up SIP.
A SIP suits investors with a regular monthly surplus, because it invests automatically across high and low market levels and removes the need to time your entry. A lump sum is more suitable when an investor receives a bonus or a maturity amount. Many investors use both options.
Mutual Funds are regulated by SEBI, hold assets with an independent custodian and disclose their portfolio and NAV publicly, so the structure is well governed. However, returns are not assured. Every scheme carries market risk, and the level of risk depends on the category — a Liquid Fund and an Equity Fund carry very different risk.
Both plans invest in the same portfolio, managed by the same fund manager. A Direct Plan has a lower expense ratio because no distributor commission is built into it, and the investor manages everything themselves. A Regular Plan includes a trail commission that pays for distributor services like support with KYC, switches, redemptions, transmission and other paperwork. DhanTarang deals in Regular Plans only.
It depends on the category. Liquid and Overnight Funds suit a few days or weeks. Debt Funds generally suit one to three years. Equity Funds are generally considered for five years or more, because a longer period gives the investment time to ride out market cycles.
Yes, for open-ended schemes. You can redeem units on any business day at the prevailing NAV, and the money is normally credited to your bank account within T+2 working days. ELSS funds are locked in for 3 years. Some schemes apply an exit load if you redeem within a set period, so check the scheme document.
No. Mutual Fund units can be held in statement-of-account form without a Demat account. A Demat account is only needed if you want to hold units in dematerialised form or invest in ETFs.
DhanTarang Fintech Pvt. Ltd. is an AMFI-registered Mutual Fund Distributor, ARN-343986, registered on 27/10/2025 and valid till 26/10/2028. We deal in Regular Plans and earn a trail commission from the Asset Management Company, which is disclosed to every client at the time of investment. DhanTarang does not charge its clients any fee.
Complete your KYC online, create your DhanTarang account on the app or website, set up a one-time banking mandate, and choose your scheme and monthly amount. The process is online and most investors complete it in under 15 minutes. You can also call +91 73043 43927 and we will guide you through it.
Whether you are saving for a child's education, a home, a vacation or retirement, we will help you complete your KYC, shortlist schemes that match your goal and time frame, and set up your first SIP. There is no fee to you at any stage.
Mutual Fund investments are subject to market risks. Read all scheme-related documents carefully. AMFI Registered Mutual Fund Distributor · ARN-343986