It is important to understand the Mutual Fund type and their features. Mutual Fund types can be classified based on the following characteristics.
- Based on Asset Class
- Equity Funds
- Debt Funds
- Money Market Funds
- Hybrid Funds
- Based on Structure
- Open-ended Funds
- Closed-ended Funds
- Interval Funds
- Based on Investment Goals
- Growth Funds
- Income Funds
- Liquid Funds
- Tax-Saving Funds
- Terrace
- Garden
Various type of Mutual Funds exist to cater to different needs of different people. Largely, they are of three types.
Equity or Growth Funds
These invest predominantly in equities i.e. shares of companies. The primary objective is wealth creation or capital appreciation. They have the potential to generate higher return and are best for long-term investments.
Examples would be “Large Cap” funds which invest predominantly in companies that run large established business “Mid Cap” funds which invest in mid-sized companies. “Small Cap” funds that invest in small sized companies “Multi Cap” funds that invest in a mix of large, mid and small sized companies. “Sector” funds that invest in companies that are related to one type of business. For e.g.Technology funds that invest only in technology companies.
Thematic” funds that invest in a common theme. For e.g. Infrastructure funds that invest in companies that will benefit from the growth in the infrastructure segment
Income or Bond or Fixed Income Funds
These invest in Fixed Income Securities, like Government Securities or Bonds, Commercial Papers and Debentures, Bank Certificates of Deposits and Money Market instruments like Treasury Bills, Commercial Paper, etc. These are relatively safer investments and are suitable for both Capital Protection and Income Generation.
Example would be Liquid, Short Term, Floating Rate, Corporate Debt, Dynamic Bond, Gilt Funds, etc.
Hybrid Funds
These invest in both Equities and Fixed Income, thus offering the best of both, Growth Potential as well as Income Generation.
Example would be Aggressive Balanced Funds, Conservative Balanced Funds, Pension Plans, Child Plans and Monthly Income Plans, etc.
Hybrid Funds
These invest in both Equities and Fixed Income, thus offering the best of both, Growth Potential as well as Income Generation.
Example would be Aggressive Balanced Funds, Conservative Balanced Funds, Pension Plans, Child Plans and Monthly Income Plans, etc.
SIP
Systematic Investment Plan (SIP) helps you build wealth, step - by - step, over a period of time. SIP can be started for as low as Rs. 500 per month and gives you the benefit of the power of compounding and rupee-cost averaging. SIP payments can be automated by providing an online mandate. SIP is an investment mode through which you can invest in mutual funds. As the term indicates, it is a systematic method of investing fixed amounts of money periodically.
Mutual Funds
A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities. The term is typically used in the United States, Canada, and India, while similar structures across the globe include the SICAV in Europe and open-ended investment company in the UK.
LUMP-SUM
Lump-sum allows you to invest in a Mutual Fund by paying a bulk amount. There is no compulsion to buy units at regular intervals or for any fixed amount if you wish to reinvest in the same fund.