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What are the Different Kinds of Mutual Funds?

Author: Shashank Pawar
by Shashank Pawar
Posted: Oct 18, 2019

Many types of mutual funds are available to cater to the various needs of investors. There are three main types, however, which are: Equity, Fixed Income, and Hybrids. Let’s take a look at each of them:

  • Equity Funds

These invest mainly in equities, i.e., shares of public companies. Their main objective is to create wealth through capital appreciation. They often deliver higher returns and are ideal for long-term investing.

Examples of equity funds:

  1. Large-cap funds - invest in enterprises which run big established businesses
  2. Mid cap funds – these invest in medium-sized firms
  3. Small cap funds – they invest in small businesses
  4. Multi cap funds - invest in a combination of small, mid-sized, and large companies
  5. Sector funds - invest in enterprises that are related to a specific industry. For example, technology funds that only invest in technology firms.
  6. Thematic funds - invest in a particular theme. For instance, infrastructure funds invest in businesses that benefit from development in the infrastructure sector.
  7. Tax-saving funds - These funds like ELSS (Equity-Linked Savings Scheme) help investors reduce their income tax burden.

Fixed Income or Bond Funds Fixed income funds invest in income securities like government bonds, debentures, commercial papers, and money market schemes like treasury bills, bank certificates of deposit, and others. They are safer compared to equity funds as they are less subject to volatility caused by market fluctuations. In addition, they typically offer investors a steady and assured the flow of income. Examples are gilt, dynamic bond, corporate debt, short term, floating rate, liquid funds, etc.

  • Hybrid Funds These balance income generation with growth potential as they invest in both fixed income and equities. The types include monthly income plans, pension plans, child plans, conservative balanced funds, aggressive balanced funds, etc.
  • What is Debt Fund?

Debt mutual funds invest in fixed-income schemes like government and corporate bonds, money market instruments, corporate debt securities, and similar securities that provide capital appreciation. These funds are also termed bond funds or fixed income funds.

The advantages of debt mutual funds are relatively high liquidity, reasonable safety, stable returns, and low-cost structure. These schemes are perfect for risk-averse investors who seek regular income. They are a good alternative to bank fixed deposits as they offer relatively better returns and are often more tax-efficient. Debt funds are more secure compared to equity funds so you can invest in them with confidence and peace of mind.

Best Investment Funds to Put Your Money In The goal of most mutual fund investors is to get outstanding returns for a long period of time. However, it is impossible to predict the behavior of the market as well as determine which plan and manager have the ability to capitalize on market conditions. Furthermore, you cannot select the best investment funds based on past performance alone, as even financial experts are not able to accurately predict the future.

Conclusion Do not be greedy for high returns and be sure to consider factors such as your current and future needs, risk appetite, and ideal income that you’d like to obtain when investing in a mutual fund.

Many types of mutual funds are available to cater to the various needs of investors. There are three main types, however, which are Equity, Fixed Income, and Hybrids. Visit Mutual Funds Sahi Hai for more information

About the Author

Here's a little bit about myself. I've done a Masters in Economics and teach the subject to high school students. I am 32 years old and married to an investment advisor. A Dhoni fan who loves to play football! I am a sports enthusiast and a firm beli

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Author: Shashank Pawar

Shashank Pawar

India

Member since: Dec 24, 2018
Published articles: 46

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