Types of Mutual Fund- are modern investment system where a number of investors invest their money to get a proportional returns. The investments are made on several classes of Assets depending upon the choice of investors. These investment schemes are regulated by The Security and Exchange Board of India (SEBI).
There are several type of Mutual Fund Schemes available in the market. Before thinking about investment in Mutual Fund the investor must know about the types of Mutual Fund Schemes so that he can sort out which type of Mutual Fund is best for achieving their goals.
Base of Investment Objectives:
Growth Scheme:
Growth Scheme is a type of Mutual Fund scheme where the gain from the Mutual Fund is re-invested in the same scheme. This scheme is for those investors who want long term capital appreciation. The companies with higher divided payouts are kept away in this Scheme by the AMC. This scheme focuses on high returns.
Income Scheme:
This is another scheme of Mutual Fund where the Asset is mostly invested by AMC in different security bonds and debentures of companies which have fixed maturity period. You can also get divided payouts at regular intervals
Liquid Funds:
It is a short term investment scheme where money is invested in short term maturity instrument. This scheme is of low risk and ideal for Short Term Investment.
Asset Class Base:
Equity Mutual Fund:
Equity Mutual Fund is a type of Mutual Fund where your money is invested in different companies’ Equity Shares in the stock market. This Equity Mutual Fund has a option to create a good capital for future. If an investor want to gain from the stock market this Equity Fund is a good investment for them.
There are several type of Equity Mutual Funds provided by the Mutual Fund companies. The choice of Equity Investment is dependent on the objectives, risk capabilities, term provision of the Investor.
| Large-Cap Fund | Invests in top 100 ranked companies of the Stock Market | Risk accountability is low and returns are nominal |
| Mid-Cap Fund | Invests from 101 to 250 ranked companies of the Stock Market | Risk accountability is higher than Large-Cap Funds and chance of higher return |
| Small-Cap Fund | Invests in companies beyond the ranking of 250 | Very risky but might get fantastic gain |
| Large and Mid-Cap Fund | Invests in the top 250 companies of the Stock Market | Risk Accountability is average and returns are better |
| Multi-Cap Fund | Invests in all type of Equity Fund in a ratio | Risk accountability is average and returns are better |
Commodity Fund:
Commodities are the basic tangible product that can be bought and sold in the market. The commodities includes metals like gold and silver, grains like wheat and rice or minirals like Crude oil and natural gas. This type of Mutual Fund invests in a particular commodity and provides good return to the investors.
Exchange Trade Fund (ETF):
Exchange Trade Fund deals with benchmarks of different classes of Assets. This type of Mutual Funds are also called Funds of Funds (FoF). These funds are passively managed Mutual Fund so the management fee for these type of Funds is least. Since the investments in these schemes are made on benchmarks, there is less probability for it to outperform or underperform. There are several types of ETFs:
| Index ETF | Deals with Stock Market Indexes such as Nifty, Sensex, BSE-100 etc. |
| Gold ETF | Deals in Gold Investment |
| Bank ETF | Deals in Banking Stock |
| International ETF | Deals in International Market Indexes |
Income Base
Debt Fund:
Debt Fund is another type of Mutual Fund where the Asset is invested in government or corporate’s bonds and securities. They provide a fixed income and helps in appreciation of capital. This type of Mutual Fund is less volatile than Equity Fund. A investor who wants regular income with very low risk can invest in this scheme.
The Mutual Fund companies buys the bonds at a price and sale those at a margin. In addition these bonds provide a certain rate of interest also. The NAV of your fund also increases with the interest. The investor also gets dividend from the investment which is non taxable.
The Debt Funds are considered as emergency funds. The investment made by the investor has a least chance of getting negative. The investor gets the confidence of combating in the times of emergency. It is good investment option for both long and short term investment.
Money Market Fund:
Money market fund is another type of Mutual Fund. This is one of the list volatile mutual funds. The investment of the Asset is made on Debt securities with different type of companies for a short term up to 1 year. The rate of interest is increases the NAV. When the Debt securities to borrower decreases then there is influx in the rate of interest to overcome the losses. This makes it a least riskier Fund.
Gilt Fund:
The term Gilt denotes Government Securities. The investment in this type of Mutual Fund is made in Government Securities for different maturity period. These securities are offered by Central and State Government. As the investment involves with the government, there is zero default risk in these types of investment. The rate of interest of the investment is dependent on the terms of the investment. The longer the term the higher the interest.
Multi Asset Base
Balance Fund:
Balance Fund is a low risk Mutual Fund. This type of Mutual Fund Schemes provide an opportunity for the investors to get regular income as well as capital appreciation. The asset is invested in different types of Mutual Fund in a balanced ratio. It allows investors to enjoy moderate return as the risk factor is very low. 40% to 60% of the Asset is invested in Equity Fund and the rest may be invested in other security Fund. The plan may achieve better results for investors if it is invested for more than 5 years.
Hybrid Mutual Fund:
Hybrid Mutual Funds are quite similar to the Balance Funds. It also invests in Equity and Debt Funds. The main difference between these two type of Mutual Fund is that Hybrid Fund may move towards the Assets class for better returns. There is no pre defined percentage of investment in any Asset Class. More percentage of asset may be invested in a scheme if there is chance of return is higher. The risk factor is moderate in Hybrid Fund but comparatively more than the Balance Funds. It is ideal for investment for good return and regular income as well with moderate risk appetite.
Special Mutual Fund
Close Ended Funds:
The Mutual Funds that are offered for only short duration of time, after that it can not be bought again are called Close Ended Fund. This type of Mutual Fund Schemes come with a fixed redemption or maturity period. The reinvestment is not possible in this scheme. If the investor does not redeem his Fund, it will automatically redeem itself and the amount get credited to the investor’s bank account.
ELSS Mutual Fund:
Equity Linked Saving Scheme (ELSS) is another type of Mutual Fund where most of the investment is made in Equity instrument. It is Mutual Fund cum Tax saving scheme which gives Tax Deduction up to Rs 1.5 lakh under section 80c, Income Tax Act 1961. It comes with a lock in period of 3 years which is least among all tax saving investments.
Solution Oriented Fund:
This is a newly launched Mutual Fund scheme. This type of Mutual Fund Scheme provides a way for the financial planning for retirement or for children. This scheme comes with a Lock-In period of five years with Exit Load charges in case of retirement plan (Redemption before the age of 60). In case of Children plan, it cannot be redeemed before the child get the age of 18.
Overview :
We have understood about different type of mutual fund. Before investment in mutual fund and investor should understand about its various types. The investor should also acknowledge their objectives of investment term of deposit, risk accountability, Tax efficiency etc before investing. And should choose the best type of mutual fund which would be comparatively better for their needs.
Conclusion about types of Mutual funds:
So basically this post is all about types of Mutual funds 2023. In this post we are discuss about how many types of Mutual funds are there in markets. so that beginner people can easily understand about types of Mutual funds because types of Mutual funds is not a rocket science. although a small amount can make a big difference. So hope you guys like this post, please SHARE with your love ones and do COMMENT. If you want to join with us then click our telegram group and join a well.