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Types Of Mutual Funds India

Do you have plans for investing in mutual funds? If the answer is yes, then mutual funds are a great option since they offer a system which is preferable for most investors’ needs. Investors often reap huge rewards by investing in mutual funds along with enjoying good returns over a sustained period of time. In case the returns are higher, the risk quotients are also higher likewise. You will find different types of mutual fundsin India that you can compare in this regard.

As an investor, you must know that mutual funds and its typesare based on structure, asset class, and investment objectives among other parameters. Thus, you must know the plans well and opt for the one that suits your financial objectives to the hilt.  The classification of mutual fundsis endless. But one must always invest after thorough research and homework in this regard.

Types of available mutual funds in India

When you plan to invest in mutual funds, you must have an idea about the different mutual fund types available within the country. Let’s take a look at the types of Mutual Funds available in India:

  • Mutual fund based on investment goals
  1. Growth Funds

Under this plan, investors can invest money for capital appreciation in equity stocks. This is suitable for investors with a long-term horizon even though the risks are higher.

  1. b.    Income funds

This plan encourages investors for investing money in debentures and bonds. It offers capital protection and a steady flow of income to investors.

  1. c.     Liquid funds

When you choose this plan, invest your money in investment instruments which are short-term like CPs and T-Bills for getting greater liquidity. It is a less risky investment and the returns are reasonable. 

  1. d.    Capital protection funds

The chief purpose of these fund types is to care for the money invested by the investors and the funds get divided between fixed-income investments and equity.

  1. e.     Pension Funds

A pension fund is the fund in which money is invested for a prolonged period with the objective of getting regular pension post retirement.In this fund, the money is invested in debt instruments and equity. The return from the pension fund can be good if invested at the right time.

  1. f.      Fixed maturity funds

Here the investment is made in closed-ended debt funds that have fixed maturity dates.

  • Based on structure
  1. a.    Open-ended funds

This has been found to be a favoured plan for investors,since open-ended funds offer liquidity. This mutual fund type generally deals in units that can be purchased as well as redeemed based on the Net Asset Value (NAV) round the year.

  1. b.    Close-ended funds

This fund type means that investors can buy instruments which deal with units during the primary period, although they can be redeemed on a particular maturity date.

  1. c.     Interval Funds

The funds that have features of both open-ended funds and closed-ended funds are referred to as interval funds. These funds are closed funds and have the option to transact money directly for a pre-decided period. Interval funds come with open-ended features throughout the pre-decided timeline.

Based on asset class

  1. a.    Debt funds

These are mutual funds that usually invest in corporate bonds, government securities etc. These funds are found to be steadier and less unpredictable in light of market conditions.

  1. b.    Equity funds

These mutual funds mainly invest in equity stocks of companies. These funds are considered to be highly risky but offer higher returns in the long run. 

  1. c.     Hybrid funds

These funds are basically a mixture of debt and equity funds. They have a tendency to enable equal investments in debt and equity funds for keeping the risk levels more balanced in investments. For example : HDFC hybrid equity fund direct growth by HDFC mutual fund.

  1. d.    Money market funds

These are plans which are highly liquid and funds are invested in short-term investment avenues such as treasury bills, deposit certificates and so on. Investors can make an investment in this mutual fund for a short duration, even for a day if they wish.  

  • Based on specialty
  1. a.    Fund of funds

These types of mutual funds make investments in other mutual funds. Returns from these funds completely depend on the target fund performance and they are also called multi-manager funds as a result.

  1. b.    Real estate funds

The name of the mutual fund makes it clear that the funds are invested in the real estate business. The investment can be done at any phase in the project.

  1. c.     Market neutral funds

They do not invest in the market directly. The investment is made in treasury bills and securities with the purpose of fixed and steady growth.

  1. d.    Asset Allocation Funds

These funds allow the fund manager to adjust allocated assets for achieving results. The invested funds get divided into such funds for investment in various instruments like equities and bonds.

  • Based on risk
  1. a.    High risk

The investment here is high and is for those who can take high risks while expecting lucrative returns. Here, the majority of the money gets invested in equity stocks of companies.

  1. b.    Medium risk

These types have medium risk levels for investors and are suitable for those keen on raising their risk appetite while getting good returns at the same time. This investment option is a mixture of equity and debt funds.

  1. c.     Low risk

These mutual funds mainly invest in the debt market where the investment risks are on the lower side. The investments are mainly for a longer duration but due to associated risks, the returns are also moderate.

If you are keen on investing in mutual funds like Sundaram Mutual Fund,know the fund well before investing and enjoy higher returns. Consider types of mutual funds with examples by doing extensive research. The investment must be made in order to yield high returns over a prolonged time period. Investments in mutual funds are the most sought-after avenue in recent times.

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