What are the Different Types of Mutual Funds in India?
The popularity of mutual funds in India gets evident by the increasing numbers of investors from all over the world who invest in diverse mutual fund plans in the country. The various categories of mutual funds allow the investor to assess and measure his investment goals before investing in a policy. The involvement of an experienced fund manager dealing with the know-how of mutual fund investing let the investor worry less about the positive returns. The choice of mutual funds depends upon the risk-bearing capabilities of the investor and accordingly he would choose either high risk-high returns funds or the low risk-low-returns funds. If we classify mutual funds based on their nature, we would get the following results:
1. Equity Funds
Money invested in equity schemes are used into equity stocks and holdings depending upon the fund manager's outlook. Equity fund can further be sub-categorized as follows, based on the objective of the investment:
a) Diversified Equity Funds: These assets are invested in large-size blue chip companies, stocks and other equity market. The return depends upon the overall stock market performance and the selection of winning stocks by the fund manager.
b) Mid-Cap Funds: These assets are invested in small and mid-level companies' stocks and equities with good potentials and growth prospects. The returns depends on their progression and increase in value in the stock market.
c) Sector-Specified Funds: Some investors prefer investing in specific sectors or industries depending upon their current growth ration and future expansion. Various sectors where the assets are invested are FMCG, Infrastructure, Pharmaceuticals, Real Estate and Technology.
d) Tax-Saving Funds: These assets are invested in equity-linked schemes where the investor also enjoys tax-free dividends or returns. There is a lock-period of 3 years for this investment and the policy offers the investors rebates on tax under the Income Tax Act of India.
2. Debt Funds
Debt funds refers to the amount invested in government bonds & reputed companies. These investments are low-risk in nature and provide a stable income to the investors. Debt funds can be further sub-categorized into:
a) Income Funds: The investor puts his money in varied debt instruments including corporate debentures, bonds and government securities.
b) Gilt Funds: The core fund is invested in government-issued securities. Except for the interest rate risk, these funds carry no other market risks as these are government-backed schemes.
c) MIPs: The maximum of this fund is invested in debt instruments with the rest of it being invested in equity schemes which makes the investment slightly high on risk-return factors.
d) Liquid Funds: These funds are invested in short-term instruments which include inter-bank call money market, CPs, CDs and treasury bills. These money market schemes provide easy liquidity to investors.
e) Short-Term Plans: These funds are invested for short-term goals of 3-6 months which include Certificate of Deposits and Commercial Papers and some portion of it is invested in corporate debentures.
3. Balanced Funds
The money invested in balanced funds reaps the benefit of both equity schemes and debt funds and hence provides a mid-path between the risk of equities and fixed income securities. As the name suggests, investing in balanced funds bring the best out of both equities and debts, which means it provides both growth and stable returns to the investors.
Apart from these classifications, investments in mutual funds also depend upon the monetary needs and investment objectives of the investors, his risk-bearing capacities and timely financial goals. According to these aspects mutual fund investment can also be categorised under growth schemes or equity schemes, debt schemes or fixed-income securities, balanced scheme which include both growth of equities and incomes of debt papers and money market schemes which provides easy liquidity to investors.
Source : http://www.squidoo.com/what-are-the-different-types-of-mutual-funds-in-india
1. Equity Funds
Money invested in equity schemes are used into equity stocks and holdings depending upon the fund manager's outlook. Equity fund can further be sub-categorized as follows, based on the objective of the investment:
a) Diversified Equity Funds: These assets are invested in large-size blue chip companies, stocks and other equity market. The return depends upon the overall stock market performance and the selection of winning stocks by the fund manager.
b) Mid-Cap Funds: These assets are invested in small and mid-level companies' stocks and equities with good potentials and growth prospects. The returns depends on their progression and increase in value in the stock market.
c) Sector-Specified Funds: Some investors prefer investing in specific sectors or industries depending upon their current growth ration and future expansion. Various sectors where the assets are invested are FMCG, Infrastructure, Pharmaceuticals, Real Estate and Technology.
d) Tax-Saving Funds: These assets are invested in equity-linked schemes where the investor also enjoys tax-free dividends or returns. There is a lock-period of 3 years for this investment and the policy offers the investors rebates on tax under the Income Tax Act of India.
2. Debt Funds
Debt funds refers to the amount invested in government bonds & reputed companies. These investments are low-risk in nature and provide a stable income to the investors. Debt funds can be further sub-categorized into:
a) Income Funds: The investor puts his money in varied debt instruments including corporate debentures, bonds and government securities.
b) Gilt Funds: The core fund is invested in government-issued securities. Except for the interest rate risk, these funds carry no other market risks as these are government-backed schemes.
c) MIPs: The maximum of this fund is invested in debt instruments with the rest of it being invested in equity schemes which makes the investment slightly high on risk-return factors.
d) Liquid Funds: These funds are invested in short-term instruments which include inter-bank call money market, CPs, CDs and treasury bills. These money market schemes provide easy liquidity to investors.
e) Short-Term Plans: These funds are invested for short-term goals of 3-6 months which include Certificate of Deposits and Commercial Papers and some portion of it is invested in corporate debentures.
3. Balanced Funds
The money invested in balanced funds reaps the benefit of both equity schemes and debt funds and hence provides a mid-path between the risk of equities and fixed income securities. As the name suggests, investing in balanced funds bring the best out of both equities and debts, which means it provides both growth and stable returns to the investors.
Apart from these classifications, investments in mutual funds also depend upon the monetary needs and investment objectives of the investors, his risk-bearing capacities and timely financial goals. According to these aspects mutual fund investment can also be categorised under growth schemes or equity schemes, debt schemes or fixed-income securities, balanced scheme which include both growth of equities and incomes of debt papers and money market schemes which provides easy liquidity to investors.
Source : http://www.squidoo.com/what-are-the-different-types-of-mutual-funds-in-india
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