Various Types of mutual fund

The Investor need to understand types of Mutual Funds before taking decision to invest hard earned money in mutual fund scheme. As a investor based on investment time duration and investment amount you need to choose perfect mutual fund scheme.  Once there was a time when mutual funds were considered a small player in financial markets. But nowadays it has a great role to play in all this. Now it plays an important role in stock valuation and bond valuation.

The Mutual fund schemes gets huge retail money through SIP, NFO schemes. They Invest Retailers money in Stock market, Government Bonds, NBFC Bonds & Debt schemes. If you are an investor then you have units of Mutual Funds scheme. This represents the portion in it that you have which is equal to the amount you have invested in it. If the valuation of this investment increases it will be distributed among all investors in proportion to the number of units they own.

Asset Management, companies provides us with various types of mutual funds but here they are differentiated based on their structure, specialty, objective and risk. You can invest in Mutual fund via online and offline methods. The online mutual fund distributer can be brought via Groww, Paytm Money, PhonePe and other mobile platforms.

Everything has both sides positive and negative which we have to keep in mind. Similarly, mutual funds have benefits and disadvantages compared to other investing options. The Best benefits of Mutual fund Investment is compounding effect of the invested money.

You can classify different types of Mutual fund based on Various parameter. Like Types of Mutual fund based on

  • Structure of Mutual Fund Scheme
  • Risk Appetite
  • Type of Asset
  • Investment Goal (Time Duration)

The Mutual fund scheme will invest money in Debt, Equities or combination of Both. So most of time when you scroll mutual fund distributer’s investment option, you need to look for the allocation of Debt and Equites in the scheme. The Types of Mutual Fund are

  • Open Ended Funds
  • Close Ended Funds
  • Interval Funds
  • Equity or growth schemes
  • Money Market Funds
  • Fixed Income Funds / Debt Mutual Funds
  • Hybrid Funds
  • Gilt funds
  • Tax-saving Funds
Types of Mutual Fund

Types of Mutual Fund

First we will discuss about the Types of Mutual Fund based on Asset allocation. There are several types of mutual funds which can be categorized as a funds of asset class there are several types like equity funds, debt funds, hybrid funds and other funds.

Equity Funds

Equity Funds invest money in Listed Equities of the BSE and NSE. The allocation of the Money in different equities are based on customer’s risk appetite. Based on customer’s choice mutual fund manager will invest money in Large Cap stocks, Medium cap stocks, Small Cap Stocks or Mix of any of these. You can say that Equity funds are most popular funds among mutual fund investor.

If you wanted to save your Tax than you can invest your money in ELSS fund. The Mutual funds scheme also offer Index Funds to the customer. The customer can invest in mutual funds scheme which offer investment in NIFTY 50, NIFTY 100, NIFTY Jr, Bank Nifty or other market Index.

Debt Funds

This type of mutual funds normally into securities of fixed income like that of bonds of corporate, Treasury bills and government securities. These types of funds can come with us stability and with very low and that on small minimum risk. these funds are further divided into many other types like

  1. Liquid funds
  2. Funds of low duration
  3. Funds of credit risk
  4. Funds of gilt
  5. Funds of overnight.

The Gilt mutual fund offer decent return on investment as it only invest in Government Securities. The customer can invest money in Debt market which offer less volatility than Equity Funds.

Hybrid funds

This type of fund include instruments of both type like debt and equity. so they can balance out both debt and equity. We can choose between types of investment in form of fixed or varied. another broad type of hybrid funds is aggressive and balanced type funds.

The Mutual Fund can be classified based on Structure also. The types of Mutual fund based on Structure are Open Ended Funds, CLose Ended funds and Interval Funds.

Open-ended Type Funds

n these funds, you are allowed to purchase and release funds throughout the year. This also allows them to invest for a longer time. Additionally, they have no limit for investment amount.

Close-ended type of funds

in this type of fund you are allowed to additionally at starting period which is an initial public offer. These types of funds are can not be sold back in mutual funds. It will be only sold at the stock market at their price.

Interval type of funds

in this, they have included the features of both the scheme of the above close-ended and open-ended. So it provide you flexibility to investment goal.

Now we will look further for the Types of Mutual Funds based on Risk factor. Risk is the most important factor in this type of investment. everyone has their different type of risk-taking level and capacity. based on this they choose between long term and short term funds.

Low risk mutual funds

if you choose very low risk and low-risk funds then the return you will get will be also small. Remember higher risk then Higher return. But if you are conservative Investor then you must invest your hard earned money in Low risk mutual fund.

Medium risk mutual funds

If you choose medium risk funds then it will be ideal for those who want to take caluculted risk and some amount of return then it  best suited for them for to choose this type of funds.

High risk mutual funds

If you are interested to take High risk and earn more and want to become wealthy it is best suited for the. This makes wealthy earlier but it has a high risk too. Depends on you to what risk you want to take.

Conclusion

The Indian Mutual fund market offer virility of Mutual fund offerings. As the awareness for the mutual fund increased among retails, the more and more people started investing in mutual funds. It is good that because of many types of mutual fund schemes. If you want to invest in mutual funds decide earlier what kind of mutual funds you want to invest in and how much too invest. For this, you have to know all types of funds and potential to their return. You have to compare all the types of mutual fund’s earlier return and choose wisely.