Mutual Funds Types: Common Types Of Mutual Funds In India

by Arpita Wadhawan
Types OF Mutual Fund

Do you plan to invest your money in mutual funds? One of the great attractions of mutual funds is that you can find a scheme that fits your needs and taste. A pool of money is accumulated in mutual funds by many investors whose aim is to save and enjoy great returns. Even if the potential return is high in this investment plan, the risk of loss is also high in it. You can find a wide range of mutual funds in India based on its asset class, structure, and investment objective. As an investor, you must know them to choose the right one that suits your taste and financial objectives. Take a look at the different Mutual Funds types available in India.

Types OF Mutual Fund

Mutual Funds types – Get an idea

If you have plans to deposit money in mutual funds, get an idea about different types of mutual funds available in the country. A wide range of mutual funds are available in India, and they categorized based on the investment goals, structure, and asset class. Take a look at the Mutual Funds types available in India:

Mutual funds types based on investment goals

Growth funds

In this scheme, investors invest their money in equity stocks for capital appreciation. Even if it is a little risky, it is suitable for investors with long-term objectives.

Income funds

This scheme encourages people to invest money in fixed-income instruments like bonds and debentures. It provides not only capital protection but also regular income to the investors.

Liquid Funds

If you choose the liquid funds scheme, you invest your money in short-term investment instruments like T-Bills and CPs for providing liquidity. Liquid funds are one of the less risky Mutual Funds types, but at the same time, it offers moderate returns on your investment.

Mutual funds Types based on the structure

Open-ended funds

It is a favorite scheme for many investors because it offers liquidity to them. This type of mutual fund mainly deals with units which can be purchased or redeemed based on the persisting Net Asset Value (NAV) throughout the year.

Close-ended funds

Investors can purchase the instruments deal with units only during the initial period, but these units can be redeemed on the specific maturity date. Besides, these investment schemes usually listed on the stock exchange for trading in order to provide liquidity.

Mutual Fund types based on Asset class

Equity funds

Equity funds are considered as high-risk funds as they offer a higher result to their investors.  It usually invested in equity stock or company shares.

Debt Funds

If you are looking for safe mutual funds types, then the ideal option is debt funds as they provide fixed returns. In this scheme, the money is invested in the debt like company debentures, fixed income assets and government bonds.

Sector funds

In this mutual fund scheme, investments are made in a particular division or sector of the market, such as infrastructure companies. Each investor gets the returns on their investment based on the performance of that particular segment. The risk factors of sector funds vary based on the sector that you choose.

Money market funds

One of the best advantages of this type of investment is that it a safe scheme that offers a good return on investment. Investors invest in liquid instruments in this plan, such as T-Bills or CPs.

Index Funds

Index funds are certainly one of the best mutual funds types. The instruments of it represent a particular index on the exchange for monitoring the returns. It also checks the movement of the index during situations like when you purchase shares from the BSE Sensex.

Hybrid or balanced funds

Funds that are invested in various asset classes come under the hybrid or balanced funds. The risks and returns keep a perfect balance in this mutual fund type.

Tax-saving funds

Even if the risk factor involved in this scheme is much higher than other types, the investor can claim tax deductions in this investment plan. In this scheme, investments are mainly made in equity shares.

Funds of funds

These mutual funds types invest in other mutual fund schemes, and the investor gets a return based on the overall performance of the target funds in which he has deposited his money.

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