Here, we will discuss the different types of mutual funds that are currently available in the market so that you can make an informed decision regarding the same.

Broad categorization depending upon the maturity date

Depending upon the date of maturity as well as entry option, there are two types of mutual fund schemes available in the market.

  • Open ended funds: These are the mutual funds where investors can enter or invest and exit or redeem at any time. They do not have any fixed maturity date.
  • Close ended funds: These are the mutual funds where investors can enter or invest only during the initial period, also called the NFO or New Fund Offer period. They have a fixed maturity date and can be only redeemed on the given maturity date. They are listed and traded on the stock exchanges.

 Categorization depending upon risk factor

There are various types of debt mutual funds and equity funds available in India. They are as follows:

  • Growth or Equity funds: These mutual fund schemes are very popular as they allow you to participate in the stocks. Though they are often considered to be high risk, they also have the potential of high returns in the long run. Since these funds help in adding superior returns over a long term, it is best for investors looking to invest in their prime earning age. They can further be divided into three categories.
    • Index funds: These are the funds that follow a similar strategy as the index that it is based upon. It is best for people looking to invest in the equity market without depending on any fund manager.
    • Sector specific funds: These mutual funds invest money in a specific sector like infrastructure, mining, agriculture, etc. It is best for high risk investors looking for higher returns.
    • Tax saving funds: Also called as Equity Linked Saving Schemes, these funds have a lock in period of 3 year and give several tax benefits to the investors.

  • Liquid Funds: Also known as money market funds, these help in giving a reasonable return to investors by investing in short term debt instruments. They are best for investors looking to park their surplus funds in a low risk investment.
  • Debt Mutual Funds: These are the funds that invest money in fixed income instruments like bonds, government securities, debentures. They are best for investors looking for low risk and low return funds.
  • Balanced funds: As suggested by the name, these schemes divide the investments between debt and equity. The allocation between the same may change as per market risks.
  • Monthly Income Plans: These are quite similar to the balanced funds with the difference being the lesser marginal of equity assets in the proportion.
  • Gilt funds: These mutual funds invest only in the government securities. They are best for risk averse investors looking for no credit risk investments.

Mutual funds help in offering consistent returns in long term, thus also helping in the retirement planning.  If you are looking for more information regarding which one is best for you, ask your questions from our financial experts today.


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