Types of mutual funds in india
Category 1 : by structure
Category 2: By investment Objective
Equity funds-- Large cap fund, small cap fund, mid cap fund, middle cap fund, Elss fund, thematic fund,
Hybrid funds - balanced fund and mip's fund etc
Debt funds- Gilt Funds, Long term Income funds, Short term Income funds, Dynamic Bond Funds
Comparsion of mutual fund : https://www.moneycontrol.com/mutualfundindia/
If any mistakes please give suggestion
These can be purchased and redeemed anytime, hence “open”.
These funds are open for subscription for a limited period and then no further investors can buy units, hence “closed”.
Category 2: By investment Objective
With the type of investment objective and the underlying investments, is how typically mutual funds are named. For e.g, if the fund invests predominantly in equity, then it's called an equity fund. The various categories by objective are described below :
Equity funds make money for investors by investing in the equity stock market. Equity funds may be classified into further types of mutual funds, large-cap funds, mid-cap funds, small-cap funds and sector/thematic Funds. There are further types called multi-cap funds and balanced funds too, however, these are just variants.
Invest in large-sized companies
Lower risk within the equity category
usually, these are very large companies established players, with a large workforce e.g Unilever, Reliance, Infosys, etc
2. Mid-cap Funds
Invest in mid-sized companies
Relatively higher risk than large-cap
Mid-cap funds invest in mid-sized companies, these companies by being mid-sized can provide good returns. There are various definitions of mid-caps funds in the market, one could be companies with a market capitalization of INR 500 Cr to INR 10,000 Cr another could be companies beyond the first top 50 companies
3. Small-cap funds
Invest in small-sized companies
Highest risk within the equity category
Small cap companies include firms that are in their early stage of development with small revenues. Small caps are typically defined as firms with a market capitalization of less than INR 500 Crore. l. Since small-cap stocks give high growth potential and are companies in their early stage of development, they have a chance of giving high returns. But, the risk of failure is higher with small caps compared to large and mid-caps.
4. Thematic Funds
Invest in themes/sectors
Highest risk since industry-specific exposure
Thematic funds invest in a particular sector like infrastructure, Power, media & entertainment etc. Some of the mutual funds provide thematic funds, for e.g Reliance Mutual Fund provides exposure to thematic funds via its Power Sector Fund, Media and Entertainment Fund etc.
5. ELSS funds
Can invest across market-caps
The risk in the lower end in the equity category.
These are equity funds with a 3 years lock-in, and additionally, these provide benefits of section 80c to investors to the tune of 1.5 lakhs.
Hybrid funds are mutual funds that have a mix of debt and equity. The proportion of debt and equity changes. There are broadly 2 types of hybrid funds, i.e. Balanced funds & Monthly Income Plans (MIPs).
1. Balanced Funds
Balanced Funds are mutual funds with more than 65% in equity
Rest being in debt.
These are for investors with a long term view in mind, i.e. more than 3 years. Since there is a large equity exposure, I would suggest a 5-year view would be appropriate. Taxation is as per equity mutual funds due to the more than 65% equity allocation.
2. Monthly Income Plans (MIPs)
Less than 65% equity holding
Rest is debt.
There are various kinds of MIPs that exist, the differentiation being the percentage of equity in the fund. MIPs, as the name goes, started off to provide monthly income, they were seen as annuity products in the Indian market. Investing in these funds could give a monthly income to housewives or even retired persons. However, most funds do not do this now. Taxation is like debt mutual funds for MIPs.
Debt funds invest in fixed income instruments. They invest in fixed income securities like bonds, etc. Debt mutual funds mainly invest in a mix of debt or fixed income securities like Government securities, Treasury bills, Corporate bonds, etc. Debt funds are preferred by those who are looking for steady income with relatively lower risks. There are various types of debt funds :
a. Gilt Funds
b. Long term Income funds
c. Short term Income funds
d. Dynamic Bond Funds
Disclaimer: Investment is subject to market risk, read related documents carefully before invest
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