Different types of mutual funds in India

Mutual funds are slowly and steadily gaining popularity among Indian investors, and a lot of new investors are also switching to mutual funds as a tax saving instrument. Different types of mutual funds cater to different investors, requirements, and risk appetites. Based on asset class, mutual fund structure, investment objectives, risk, and speciality, different types of mutual funds are available in India. 

Here are some mutual fund schemes in India that you must know- 

Based on fund structure

• Close Ended Funds: Funds that are close-ended in nature enable investors to purchase mutual funds only during a specific period. These units can be redeemed once the investment matures. These funds are usually sold via exchanges at the prevailing price.
• Open-Ended Funds: Open-ended funds can be invested in and redeemed throughout the year. Under this, individuals can take action based on their will without any limit on the purchase and sale of the fund. There is a fee for this fund.
• Interval Funds: Interval funds have the features and characteristics of both close-ended and open-ended funds. They can be purchased at different intervals during the tenure.
  

Based on Asset Classes

• Debt funds: Debt funds invest in debt instruments, including government bonds, company debentures and other fixed-income assets. Debt funds are therefore protected from stock market risks and furnish their investors with relatively stable returns. Debt mutual funds can further be subclassified into various other mutual funds like short duration funds, liquid funds, and medium duration funds.
• Money market funds: These are funds that invest in liquid instruments like CPs and treasury bills. These funds are also considered comparatively safer.
• Equity funds: Equity funds are undoubtedly one of the most preferred mutual fund schemes that enable investors to participate in stock markets. Equity funds come with higher risks, but they also have a higher return potential in the long run. Investors in their prime earning stage and looking to create a portfolio that furnishes them with better returns can prefer equity funds. Equity funds can further be classified into index funds, tax-saving funds, and sector-specific funds.
• Hybrid funds: Hybrid funds or monthly income plans as they are commonly known have a lesser proportion of equity assets. These are suitable for investing in retired investors who would want to receive a regular income with comparatively lower risk.
  

Based on investment objectives

Based on the objective to be achieved, mutual funds can be divided into tax-saving funds, pension funds, fixed maturity funds. Growth funds that provide good growth potential, liquid funds that are done to get returns in the short term, income funds that give good returns to investors with little to zero risk and capital protection fund that provides protection to the invested capital against uncertainties. 

Based on risk

Low-risk mutual funds are for those who would like to have low returns with less risk. Medium risk funds are for generating greater wealth over an extended period of time. High-risk funds offer greater returns for higher-risk exposure. 

Based on speciality

Speciality funds may be subclassified into international funds, real estate funds, gift funds, those intended for asset allocation, funds intended for a particular sector, commodity stock funds, etc.

Prepare for your investments by using a mutual fund calculator and plan what’s best for you.