What are the types of mutual funds in India

If you have decided to secure your future, be a part of the exponential growth in the economy. This steady rise is greatly credited to mutual funds investment. A strong investment portfolio is incomplete without mutual funds. As of February 2019, India recorded to have Rs.23. 16 trillion. This type of investment is so potent as it pools all the money of the investors together and makes them work for you. Mutual funds are securities that are considered one of the best investment option for individuals seeking to grow wealth.

To understand the various types of mutual funds available in India, it can be best-assessed judging through their characteristics. Based on it, it can be classified into the following divisions.

Type of Asset – Mutual funds are of various types. Understanding which type is best for you is crucial to your investment.

  • Equity – Stock or equity is best for those who want a quick return. However, the risk in these bonds is also quite high. The money pooled in from investors are invested in various types of industries. If you are money is getting invested in stable industries like health, then it might be a good option.
  • Debt fund – Ideal for investor satisfied with steady and minimum growth return.
  • Money-market – If you are looking for a short-term investment, then this a good choice. The investor’s money is invested in money and not stock shares. Many governments related investments are done by this method.
  • Hybrid funds – These are the balanced funds that keep the investor’s interest secured.

Structure or the nature of the fund – A fund can be any one of the following in terms of its structure.

  • Open-ended – You can invest as and how much you like. Even exit is also not fixed. However, the open-ended fund can decide on rejecting any new investor.
  • Close-ended – They have fixed tenure that the investor must comply by. For the benefit of investors, SEBI has allowed investors to repurchase or exit schemes or listing with stock exchanges.
  • Interval – It is a mixture of both closed and open-ended funds. So funds can be bought or even exited at any time. However, the interval, hence the name, will stay fixed.

Goals or targets – It can be classified into the following sub-types.

  • Growth or aggressive growth funds – They are riskier choices. But they promise high returns. The idea for youngsters like millennials, who have made considerable extra wealth.
  • Income funds – The managers who deal with such funds are experts and generally help the investors get the maximum possible return through a well-diversified portfolio.
  • Liquid fund – A great debt fund which has a minimum investment tenure of as little as 91 days. They are better than many investments as the NAV includes all 365 days (others exclude holidays), hence the investor gets a high return.
  • Capital protection – It keeps your capital safe. But you will get a smaller return of at most 12 %.
  • Fixed maturity plans – This is the best option if you want to bring down your taxes. The tenure can be 1 month to 5 years.
  • Pension fund – The best way to keep your retirement worthy of looking forward to. This investment is long-drawn and can give you a substantial and consistent return.

Risk assessment – ‘Mutual funds are subject to market risk’ is known to all. The rate of risk depends on the type of fund you choose. Do remember the higher the risk, the greater the chance of you getting substantial profit. Ultra-short-term and liquid funds have low risk while high-risk mutual fund can give you up to 30% return.

Specialities – It comprises of mutual funds which have different and unique values to offer. Especially, significant is global and international funds. Emerging market funds or fund of funds are also worth explorations.

Investing in mutual funds is easy. You can open an account with a trusted organization like Kotak securities and start investing. It can be done online. The investment amount can be flexible. You can also take advantage of the systematic investment plan which allows you to invest as low as Rs. 500 a month. You will also get tax rebates. Another huge advantage of investing in mutual funds is the fact you can not only have a well-distributed portfolio but your investment will be handled by a professional manager. There are both short-term and long-term options available for investing in mutual funds. The long-term ones earn you more profit than the long-term ones.

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Teresa F. Alvarez

About the Author: Teresa F. Alvarez

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