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Types of Mutual Funds: A Complete Guide for Indian Investors
Whether you are beginning to invest in mutual funds or looking to diversify your investment portfolio. Mutual funds, managed by fund managers ensures that your investments grow steadily and beat inflation. In this article we will cover the different types of mutual fund options investors have to make smarter investments.
Different Types of Mutual Funds in India
Mutual funds in India are classified into various categories, based on the guidelines introduced by SEBI in October 2017 for scheme categorization and rationalization. Investors can select from these options depending on their financial objectives.
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Types of Mutual Funds Based on Asset Class
These are grouped according to the kind of assets they invest in such as equity, debt, or a mix of both.
- Equity Funds: These focus primarily on investing in shares of companies and are best suited for investors aiming for long-term capital appreciation.
- Debt Funds: These allocate investments to fixed-income assets such as government securities and corporate bonds, offering lower risk and more stable returns.
- Money Market Funds: These invest in short-term debt instruments, making them a suitable option for managing temporary surplus funds with minimal risk.
- Hybrid Funds: These funds blend equity and debt investments to provide a balanced mix of growth potential and income stability.
Types of Mutual Funds based on Investment Goals
These Mutual Fund (MF) types are designed to help investors achieve specific financial objectives like capital growth or income generation.
- Growth Funds: Aim for capital appreciation by investing primarily in equities.
- Income Funds: Focus on generating regular income through investment in debt securities.
- Liquid Funds: Offer quick liquidity by investing in short-term market instruments.
- Tax Saving Funds: Also known as ELSS, these provide tax benefits under Section 80C.
- Aggressive Growth Funds: Invest in high-growth stocks with a higher level of risk.
- Capital Protection Funds: Aim to preserve capital while providing limited exposure to equity.
- Fixed Maturity Funds: Have a fixed investment period and typically invest in debt instruments with matching tenure.
- Pension Funds: Designed to build a retirement corpus through long-term investments.
Types of Mutual Funds Based on Structure
These are defined by how investors can enter and exit the fund, such as anytime, within a fixed period, or at intervals.
- Open-ended Funds: Allow investors to buy and sell units at any time at the prevailing NAV.
- Closed-ended Funds: Have a fixed maturity period and are traded on stock exchanges.
- Interval Funds: Allow buying or selling units only during specific intervals.
Types of Mutual Funds Based on Risk
These are classified by the level of risk involved, ranging from very low to high.
- High Risk Funds: Primarily equity-oriented funds that offer potentially high returns with higher volatility.
- Medium Risk Funds: Balance between equity and debt to offer moderate returns with manageable risk.
- Low Risk Funds: Focus on debt instruments with relatively stable returns and low-price fluctuation.
- Very Low Risk Funds: Typically include liquid or ultra short-term funds with minimal risk to capital.
Specialised Mutual Funds
These types of mutual funds focus on specific sectors, strategies, or geographies to meet unique investment preferences.
|
Fund Type |
Description |
|
Sector Funds |
Invest in a specific sector like technology, pharma, or banking. |
|
Index Funds |
Track and replicate the performance of a specific stock market index like Nifty 50 or Sensex. |
|
Funds of Funds |
Invest in a portfolio of other mutual funds rather than directly in securities. |
|
Emerging Market Funds |
Focus on equities or bonds in developing markets with high growth potential. |
|
International or Foreign Funds |
Invest primarily in assets located outside the investor’s home country. |
|
Global Funds |
Invest in companies across the world, including the investor’s home country. |
|
Real Estate Funds |
Invest in listed real estate companies or real estate investment trusts (REITs). |
|
Commodity-focused Stock Funds |
Target companies engaged in commodities like oil, metals, or agriculture. |
|
Market Neutral Funds |
Aim to deliver consistent returns by hedging long and short positions, regardless of market movement. |
|
Inverse or Leveraged Funds |
Designed for short-term strategies to magnify gains or losses, often using derivatives. |
|
Asset Allocation Funds |
Adjust asset allocation between equity, debt, and others based on market trends. |
|
Gift Funds |
Enable investors to invest on behalf of others, often used for gifting financial products. |
|
Exchange-Traded Funds (ETFs) |
Mutual fund units traded like stocks on exchanges, usually tracking an index or asset class. |
Solution Oriented Mutual Funds
These types of mutual funds are designed to meet specific life goals such as retirement planning or securing a child’s future.
- Retirement Mutual Funds: Help individuals build a retirement corpus through long-term investments.
- Children's Mutual Funds: Designed to save for your child’s future education or milestones.
Conclusion
Mutual funds in India offer diverse options to suit various goals, risk levels, and investment preferences. By investing these Mutual Fund (MF) types, you can build a portfolio and your personal wealth that fits your financial aspirations. For tailored wealth management and exclusive investment opportunities, explore DBS Treasures today.
Disclaimer: The information provided is for informational purposes only and should not be construed as financial advice. Please consult with a financial advisor before making any investment decisions.
