Mutual Funds Types in India: Mutual Funds Schemes, Plans and Definition

A mutual fund is one of the many investment options available in the market. It is a professionally managed investment fund. A mutual fund is an ideal investment for all types of investors. These investors may be retail or institutional in nature. Mutual funds have advantages and disadvantages compared to direct investing in individual securities. 

The large variety of types of mutual funds available suits the needs of a vibrant range of users and offers value to all investors irrespective of the risk appetite and investment objective. 

 

The mutual funds can be differentiated on the basis of different characteristics. We have explained some of the types of classifications and underlying mutual fund as follows:

 

  • Equity Funds

Equity funds are the funds which prefer investments in equity stocks of companies. These provide with high returns but require a high risk appetite. There are different types of equity funds such as Diversified funds, Sector specific funds and Index based funds

 

  • Diversified Funds

As the name suggests funds provide you the benefit of diversification by investing in various companies spread across sectors and market capitalization. They as suitable are for investors who seek investment opportunities across the market and wish to exploit investment opportunities in various sectors. Such funds minimize the risk on investments by diversifying the funds across the various market segments. 

 

  • Sector Funds

The funds are predominantly obsessed with investment in a particular business sector or industry. They are said to be riskier as compared to diversified funds. The inventors as well as the professionals managing their portfolios are required to keep a observation in order to maintain the worth of their portfolios. 

 

  • Index Funds

These are the stocks in which investments are done are similar to that of the corresponding index. These funds invest in the same pattern as popular stock market indices like CNX Nifty Index and S&P BSE Sensex. The value of the index fund varies with respect to the changes in the benchmark index. NAV of such schemes are proportional to the changes in the index.   

 

  • Debt Funds

Debt funds are the funds which are chiefly concerned with investment  in fixed-income instruments such as corporate bonds, debentures, government securities, commercial papers and other money market instruments. These kinds of funds are ideal for investors with low risk appetite as they have a fixed maturity date & interest rate. 

 

  • Money Market Funds

Money market funds invest in securities which have are highly liquid in nature and can be easily converted into cash. These funds offer returns in the nature of regular dividend and come with relatively lower risk and are ideal for short term investment.  

 

  • Hybrid or balanced fund 

Balanced or hybrid funds are the funds which invest a particular amount of fund in equity funds and invest the rest in other funds. The risk involved is comparatively higher as compared to debt funds, but, on the other hand generate more returns. 

 

  • Growth funds 

Growth funds invest a large portion of their capital into stocks of companies having above-average growth. The returns offered by these funds are relatively high, but the risk involved along with is also quite high. 

 

  • Income Funds

These funds aim to earn attractive returns on the investments as well as ensuring a regular income to the investors. The sum invested is put in a combination of high dividend generating stocks and government securities. 

 

  • Liquid Funds

These funds make investments in money market and debt securities. There is cap on the maximum amount of investment i.e. Rs 10 Lakhs. The tenure of these funds usually extends to 91 days. 

 

  • Tax Saving Funds

As the name suggests, these funds offer tax and other benefits to investors under the Income Tax Act, 1961. Such benefits are in the forms of deduction available in section 80 C of the Income Tax Act, 1961. 

 

 
  • Debt Fund / Fixed Income Funds

These fund invest predominantly in fixed rate securities like corporate bonds, debentures, government securities, commercial papers and other money market instruments. They are suitable for investors who are not willing to take high risks and seek regular and steady income. Debt funds give a fixed income to all its investors. Also, on critical times such as liquidations and retrenchment debt fund holders are given preferences. 

 

Gilt Funds

 
The funds are invested in the securities of Central and State Government and are very safe investment option, and are especially suitable to the medium to long-term investors who have a low-risk appetite as government securities contain no risk. 

Balanced Funds

 
These funds invest both in equity shares and debt (fixed income) instruments and strive to provide both growth and regular income. They are ideal for medium- to long-term investors willing to take moderate risks.

Exchange Traded Funds (ETFs)

 
Exchange Traded Funds (ETFs) track an index, a commodity or a basket of assets as closely as possible, but trade like shares on the stock exchanges. They are backed by physical holdings of the commodity, and invest in stocks of companies, precious metals or currencies. ETFs give you the flexibility to buy and sell units throughout the day, on the stock exchanges.
 We, at VSRK, have been serving as the best mutual fund advisers in Delhi and have been recently awarded as the Most Trusted Financial Advisor– PAN India. We expertise in creating wealth for our clients by serving to the financial needs and investment related queries.

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