Types of Mutual Funds in India

There are various types of mutual funds available for investment, but the majority of mutual funds fall into one of four broad categories: stock funds, money market funds, bond funds, and target-date funds.

Mutual funds can also be classified based on their characteristics. Typical characteristics for classification are:

  1. Asset Class: In this classification, the nature of assets in which the mutual fund investments are made determines the type of mutual fund. For example, funds that invest largely in company equity are known as Equity funds.
  2. Investment Goals: This classification bifurcates funds based on investment goals, for example Growth funds, Income funds, Liquid funds, Tax-saving funds, and so on.
  3. Risk category: The funds are classified by amount of risk to the investor, for example Very Low-risk funds, Low Risk funds, Medium Risk funds, High Risk funds. In the risk classification, equity funds are classified as high-risk funds.
  4. Specialized Mutual Funds: The funds are classified based on the special characteristics of the companies in which the investment is made, such as Sector funds (which invest in one specific sector, say IT, Pharma, etc.), Index funds (which invest in specific indexes on the stock market), emerging market funds, and so on.

For individual investment purposes, the most useful classification is that based on asset class.

Types of Mutual Funds in India

Types of Mutual Funds based on Asset Class

Equity Funds: These are funds that invest in company equity and shares. These funds are regarded as high-risk but frequently offer substantial returns. Specialty funds for equity investments can be available in the banking, fast-moving consumer goods, and infrastructure sectors, to mention a few. They are linked with the markets and frequently

Debt Funds: These are funds that invest in fixed income assets like government bonds, corporate debentures, and other debt instruments. They offer fixed returns and are considered as safe investments. These funds do not withhold taxes from investors' earnings at source, thus if those earnings reach ₹ 10,000, the investor is liable for paying the tax bill.

Money Market Funds: These are funds that invest in short-term securities like T-Bills and CPs. They are regarded as secure investments for people seeking quick but modest returns on spare cash. Cash markets are another name for money markets, and they carry credit, reinvestment, and interest risks.

Balanced or Hybrid Funds: These funds invest across a variety of asset classes. In some situations, the ratio of equity to debt is higher than in others, and vice versa. This establishes a balance between risk and reward. Franklin India Balanced Vehicle-DP (G), for instance, invests 65% to 80% of its holdings in equities and the balance 20% to 35% in the debt market, making it a hybrid fund. This is true because the risk on the debt markets is lower than on the equity markets.

No matter how little, mutual funds always involve a level of risk, thus it is crucial that investors thoroughly study their policy documents before making an investment. Reading the contract would also be good idea to make sure that the investors have a clear understanding of what they have purchased and all the facilities that come with it.


Blog Home | Visit Website | Mutual Funds Investments



Mutual fund investments are subject to market risks, read all scheme related documents carefully.

Location: India

Comments

Post a Comment

Popular posts from this blog

Best Investment Plans with High Returns in India

Image
We are all aware that the riskier the situation, the greater the profit, and vice versa. Finding an investment strategy that could produce big returns with low risk, however, becomes difficult. The best high-return investment options for your needs are covered in this article. Bank Fixed Deposits These investments have a fixed interest rate for the duration of the investment and are based on fixed income. Fixed deposits are among the most popular traditional investing alternatives. These results do not account for market risk. The duration of an FD can range from seven days to ten years. Despite their flexibility and minimal risk, FD interest rates are not as lucrative as other fixed-income investment options like Public Provident Fund, Senior Citizens Saving Scheme, etc. Equity Mutual Funds These mutual funds only invest in equity shares and are equity-based. Mutual funds are the most popular high-return investment technique in India. Results of mutual funds are impacted by ch...
Read more

Tips To Set Financial Goals for Your Future

Image
Your financial goals are the particular cash sums that you are determined to acquire in order to fulfil the life you see for yourself. Financial goals, like any goal, should be in accordance with your long-term objectives, whether these objectives include paying for your children's education, maintaining a particular standard of living in retirement, or paying off and staying out of debt. Good financial objectives are specific. For a variety of reasons, general goals like "improve my credit score" are likely to empower you to achieve them. Types of Financial Goals Short-Term Goals You may wish to create short-term objectives for items you'd like to be able to afford in the near future, such as a bathroom makeover or a trip to France, in addition to smaller, more narrowly focused goals that contribute to your long-term goals. Note how particular our case is. There's a reason for this. Financial psychology has the ability to aid you in achieving your objec...
Read more

5 Money Management Tips to Improve Your Finance

Image
Spending, saving, investing, and even budgeting are all part of good money management. So how do you boost your financial self-assurance and lower your anxiety about reaching your financial objectives? Finding ways to better manage your finances and your mindset could be beneficial. Track your spending In general, it's beneficial to set aside some of your monthly income before using it for expenses like food, rent, energy, loan payments, insurance premiums, and other needs. By doing this, you can be sure that you are prepared for everything that might happen and lower the likelihood that you will spend more than you intended. Utilize the free online resources available to you for managing your finances. If you prefer a paper-based option, you could also just collect your receipts and record everything in a planner or notepad. Don’t commit to any new recurring monthly bills Your monthly earnings are totaled. This includes any extra money you may receive in addition to your...
Read more