Investing in mutual funds is a simple yet powerful way to grow wealth. Whether you’re new to investing or looking for steady returns, mutual funds offer diverse options for every goal and risk appetite. With professional fund management and easy accessibility, mutual funds help beginners kick-start their financial journey.
Here’s a curated list of some of the best-performing mutual funds and SIPs for beginners in 2025, making it easier for you to decide where to invest and grow your wealth systematically.
Best Mutual Funds for Beginners in 2025
| Name | AUM (Rs. in Cr.) | Expense Ratio | CAGR 1Y (%) | CAGR 3Y (%) |
| Motilal Oswal Midcap Fund – Growth | 22,897.62 | 1.62% | 62.44% | 35.37% |
| LIC MF Infrastructure Fund – Growth | 852.07 | 2.34% | 57.53% | 33.14% |
| Bandhan Small Cap Fund – Regular Plan – Growth | 9,248.28 | 1.72% | 52.22% | 29.44% |
| Canara Robeco Infrastructure – Regular Plan – Growth | 866.51 | 2.30% | 45.15% | 29.41% |
| Nippon India Small Cap Fund – Growth | 61,646.36 | 1.43% | 34.22% | 28.31% |
Mutual Fund Categories Defined by SEBI
The Securities and Exchange Board of India (SEBI) has outlined specific categories for mutual funds to ensure clarity and consistency for investors. Here’s a detailed breakdown of the categories under Equity, Debt, Hybrid, Solution-Oriented, and Other Schemes.
Equity Mutual Funds
SEBI has established 11 categories for Equity Mutual Funds. However, fund houses can only offer 10 categories, requiring them to choose between Value Funds or Contra Funds. To streamline understanding, SEBI has defined market capitalization:
| Category | Investment Focus | Minimum Equity Investment | Key Features |
| Multi Cap Fund | Large, Mid, and Small Cap Stocks | 65% | Diversified across all market caps |
| Large Cap Fund | Large Cap Companies | 80% | Focused on the top 100 companies by market capitalization |
| Large & Mid Cap Fund | Large Cap (35%) + Mid Cap (35%) | 70% | Combines growth potential of large and mid-sized companies |
| Mid Cap Fund | Mid Cap Companies | 65% | Focused on companies ranked 101-250 by market capitalization |
| Small Cap Fund | Small Cap Companies | 65% | Focused on companies ranked 251+ by market capitalization |
| Dividend Yield Fund | Dividend Yielding Stocks | 65% | Invests in companies with consistent dividend payouts |
| Value Fund | Value Investment Strategy | 65% | Focused on undervalued stocks based on fundamental analysis |
| Contra Fund | Contrarian Investment Strategy | 65% | Invests in out-of-favor stocks with potential for future growth |
| Focused Fund | Maximum 30 Stocks (Multi Cap, Large Cap, etc.) | 65% | A concentrated portfolio of up to 30 stocks |
| Sectoral/Thematic Fund | Particular Sector or Theme | 80% | Focused on sectors like IT, Pharma, or thematic ideas like ESG |
| ELSS | Equity Linked Savings Scheme (Lock-in of 3 years) | 80% | Tax-saving fund with a 3-year lock-in |
Debt Mutual Funds
SEBI has defined 16 categories for Debt Mutual Funds, reflecting varying durations, risk levels, and objectives.
| Category | Investment Focus | Key Features |
| Overnight Fund | Overnight Securities (1-day maturity) | Minimal risk, very short-term investments |
| Liquid Fund | Debt & Money Market Instruments (up to 91 days maturity) | High liquidity and safety |
| Ultra Short Duration Fund | Debt Instruments (Macaulay Duration: 3–6 months) | Short-term investments with slightly higher returns than Liquid Funds |
| Low Duration Fund | Debt Instruments (Macaulay Duration: 6–12 months) | Balances liquidity and returns |
| Money Market Fund | Money Market Instruments (up to 1-year maturity) | High-quality instruments |
| Short Duration Fund | Debt Instruments (Macaulay Duration: 1–3 years) | Suitable for short-to-medium term goals |
| Medium Duration Fund | Debt Instruments (Macaulay Duration: 3–4 years) | Moderate risk and returns |
| Medium to Long Duration Fund | Debt Instruments (Macaulay Duration: 4–7 years) | Long-term investments with moderate risk |
| Long Duration Fund | Debt Instruments (Macaulay Duration: >7 years) | Suitable for long-term fixed-income investors |
| Dynamic Bond Fund | Across Durations | Flexible investment strategy |
| Corporate Bond Fund | Corporate Bonds (80% in highest-rated bonds) | Focused on high-quality corporate debt |
| Credit Risk Fund | Below Highest-Rated Corporate Bonds (65%) | Higher returns with increased credit risk |
| Banking & PSU Fund | Debt Instruments of Banks & PSUs (80%) | Stability through high-quality issuers |
| Gilt Fund | Government Securities (80%) | Risk-free returns from sovereign bonds |
| Gilt Fund (10-Year Duration) | Government Securities (10-year constant maturity) | Suitable for long-term risk-averse investors |
| Floater Fund | Floating Rate Instruments (65%) | Benefits from interest rate fluctuations |
Hybrid Schemes
SEBI has introduced 7 hybrid mutual fund categories, but fund houses can only offer 6, choosing between Balanced Hybrid Funds or Aggressive Hybrid Funds.
| Category | Equity Allocation | Debt Allocation | Key Features |
| Conservative Hybrid Fund | 10–25% | 75–90% | Predominantly debt-focused |
| Balanced Hybrid Fund* | 40–60% | 40–60% | Equity and debt allocation in equal proportion |
| Aggressive Hybrid Fund* | 65–80% | 20–35% | Predominantly equity-focused |
| Dynamic Asset Allocation | Managed Dynamically | Managed Dynamically | Adjusts equity-debt ratio based on market conditions |
| Multi-Asset Allocation Fund | At least 10% in 3 asset classes | – | Diversified across three asset classes |
| Arbitrage Fund | 65% Equity (Arbitrage) | – | Exploits price differences in cash and derivatives markets |
| Equity Savings | 65% Equity + 10% Debt | 10% Minimum Debt | Mix of equity, arbitrage, and debt |
Solution-Oriented Schemes
| Category | Key Features |
| Retirement Fund | Lock-in for 5 years or till retirement age (whichever is earlier) |
| Children’s Fund | Lock-in for 5 years or till the child attains majority (whichever is earlier) |
Other Schemes
| Category | Investment Focus | Key Features |
| Index Fund/ETF | Securities of a particular index (95%) | Tracks the performance of an index |
| Fund of Funds (FoF) | Underlying Mutual Funds (95%) | Invests in other mutual funds |
How do you start investing in SIP as a beginner?
Starting a SIP (Systematic Investment Plan) is a straightforward process. Follow these steps to begin:
Step 1: Define Your Goals
Decide what you want to achieve with your investment. Think about your financial goals, how much risk you can handle, and the time you have to reach these goals. This will help you pick the right mutual fund scheme.
Step 2: Get Your Documents Ready
Make sure you have all the required documents before starting:
- Proof of Identity (POI)
- Proof of Address (POA)
- PAN Card
- Bank Account Details (including account number, IFSC code, etc.)
You might also need a copy of your passport or driving license to complete the KYC process. Double-check that all your bank details are correct to avoid delays.
Step 3: Complete the KYC Process
KYC (Know Your Customer) is mandatory for SIP investments. To complete it, provide basic details such as your name, address, PAN number, and bank details. You can complete the KYC process by:
- Visiting the office of an AMC (Asset Management Company) or RTA (Registrar and Transfer Agent).
- Doing it online through an AMC or broker’s platform.
Step 4: Register for SIP
Once your KYC is done, you need to register for SIP. Here’s how:
- Online: Visit the website or app of an AMC or broker, create an account, and register for SIP by filling in the required details.
- Offline: Go to the AMC or broker’s office, fill out the SIP form, and submit it physically.
Step 5: Choose a Mutual Fund Scheme
Select a top mutual fund based on your:
- Risk tolerance
- Investment goals
- Investment duration
Before making a choice, review the fund’s past performance, expense ratio, fund manager’s experience, and the assets it invests in.
Step 6: Decide SIP Amount and Date
Decide:
- How much do you want to invest?
- How often do you want to invest (monthly, quarterly, etc.)?
- The date on which the amount will be deducted from your bank account.
Make sure your account has sufficient balance to avoid any penalties. You can also use a SIP calculator for the same.
Step 7: Set Up Auto-Debit
You can pay manually on your SIP due date or opt for auto-debit to make the process hassle-free. For auto-debit:
- Fill out an e-mandate form.
- Authorise the deduction of the SIP amount directly from your bank account.
Step 8: Submit Your Form
After filling out the registration form, submit it to the AMC or broker.
- Offline: Submit the form along with copies of required documents, like your POI, POA, PAN card, and a cancelled cheque, at the AMC or broker’s office.
- Online: Upload the necessary documents while submitting the form online.
Once your form is processed, your account will be opened, and you can start your SIP investments.
By following these steps, you’ll be all set to begin your SIP journey and work towards achieving your financial goals.
Conclusion
Starting your mutual fund journey is a step towards financial independence. Opt for the best SIP platform to invest systematically and benefit from the power of compounding. Always align your investments with your financial goals and risk tolerance, and consult with a financial advisor for personalized advice. Begin today to secure a brighter tomorrow!
Suggested Read – Top Short Term Mutual Funds for Amazing Returns and Reduced Risk in 2025
