Types of mutual funds are there in India

There are various types of mutual fund schemes available in the market: On the basis of the asset class: Debt fund: These funds invest in fixed income instruments such as bonds, security and treasury bills such as fixed maturity plans, liquid funds, gilt funds, short term plans, long term bonds, etc. They have a fixed maturity date and a fixed rate of interest. They are the best investment options for investors who get income on a regular basis. Hybrid or Balanced Funds: They are a combination of bonds and stocks. They can either have a fixed or variable ratio. These funds invest some amount of money in equity funds and some in the debt funds. The investment in hybrid or balanced fund is a bit risky but the returns are quite good. Equity Funds: They are the most common types of mutual funds. The investments in equity funds are made in stocks. The gains or losses of these types of funds are dependent on the shares in which they are invested. A lot of investors prefer equity funds because these funds offer quick growth. Money Market Fund: A lot of people invest money in money market which is known as the cash market or the capital market. They are run by banks, corporations and the government. The fund manager collects the money from various investors and puts them into these securities and offers regular mutual fund dividends in return. These entities issue money market instruments such as dated-securities, T-bills, certificates of deposits, etc. On the basis of structure: Closed-ended mutual funds: The investment in closed-ended mutual funds is fixed and that is the reason more than the predetermined number of units cannot be sold. There are some funds that are available with the New Fund Offer period. In these cases, the investors are expected to buy the units before the set deadline. The maturity tenure of the scheme is fixed and when you exit the scheme the investors have to either list their holdings on stock exchanges or purchase them again. Open-ended Mutual Funds: Open-ended Mutual Funds do not have any limits like time period or the number of units that can be purchased. Investors can trade their funds whenever they want to. They can also exit their funds whenever they want. Changes occur in unit capital whenever they want. Interval funds: They have the characteristics of both open-ended as well as closed-ended funds. These types of funds can be bought or exited at only certain intervals of time that is to be determined by the fund house. They are open for investment only for some period of time after which the investors cannot put back heir money into it. These funds require investors to invest for a period of two years. On the basis of investment objectives: Growth funds: These funds invest a large part in growth sectors and shares which makes them the ideal investment option for those people who have extra funds and want to invest in riskier schemes. The return offered is very high. The risk involved is also pretty high. Tax saving funds: These funds are becoming very popular these days as they offer dual benefits. These funds help to create wealth and save on taxes and come with a three year lock-in period. They make investments in equity and equity-related instruments. They are the ideal choice for salaried individuals who want to get long term returns. Fixed Maturity Funds: They make investments in security, bonds and money markets. They have fixed maturity periods. The tenure can range from a month to five years. Capital protected funds: These are the funds that prioritize the protection of the capital of the investors. The returns from these funds are very low. A major part of these funds is invested in debt securities and equities. They do not incur any type of loss. The investors must invest for at least three years to ensure that their capital is safe and eligible for all the tax benefits. Liquid funds: They make investments in debt securities and money market. The tenure of these funds is 91 days. The maximum amount that can be invested is around 10 lakhs. Aggressive Growth Funds: They have a high level of risk and are made to generate steep monetary returns. These types of funds are prone to market volatility and are prone to deliver impressive returns. Income funds: They are like debt funds and they are invested in a combination of securities, certificates of deposits, bonds, etc. These types of funds are profitable for those people who want to take risks. The returns are available after two to three years. They give higher returns than those offered by deposits. Pension funds: They are the best funds for those who want to save money for retirement. They offer regular income are the best option for meeting expenses like medical emergencies or a child’s wedding. On the basis of the risk profile: Medium risk funds Low-risk funds Very low-risk funds High-risk funds Specialized Mutual Funds: Exchange-traded funds Asset allocation funds Market Neutral Funds Gift funds Emerging market funds Real estate funds Global funds Market Neutral Funds Sector funds Index funds Funds of funds Foreign or international funds