investify logo
Types of Mutual Funds in India

There are various types of mutual funds in India. We will share major types of mutual funds and discuss the benefits provided them that will help you to achieve your financial goals.

Generally, we have all heard of investing in the stock market, however, investing in mutual funds can yield the same.

Therefore, this article will include all the details that you need. Let's start your journey to invest in different types of mutual funds.

Mutual Funds - Meaning and Benefits

 

Mutual funds are types of investment mediums that consist a portfolio of stocks, bonds or other types of securities. Investors often pool in their money and a professional fund manager helps to generate returns on those funds.

Moreover, they provide access to diversified and professionally managed portfolios at a low price, too small and/ or individual investors

Investing in a mutual fund is different from investing in stocks. Mutual fund holders represent an investment in many different stocks and securities rather than just one holding. 


Enter your details and request a FREE ADVISORY CALLBACK to know more about the best mutual fund scheme for you.

The following are some benefits that you get from investing in different types of mutual funds in India: 

 

1. Diversification: It helps to make the portfolio’s overall performance to be less volatile. 

2. Liquidity: Additionally, it gives flexible withdrawal options.

3. Flexibility: Again, it enables you to invest in smaller amounts. Suits your financial standing. 

4. Accessibility: Also are available on multiple platforms.

5. Various Schemes: Moreover, it gives you variety of schemes which suit your financial goals. 

6. Tax benefits: In fact, it enables you to pay reduced income tax.

To know more about the advantages of mutual funds, click here.

 

Types of Mutual Funds

Types of Mutual Funds in India - Schemes

 

Types of mutual fund in India are mainly based on:

1. Investment goal 

2. Scheme structure

3. Asset class

 

Mutual funds based on investment goal

 

1. Growth funds: It provide capital appreciation over medium to long term. 

- Growth fund investors are able to bear short term fluctuations for future value appreciation. 

- Hence, it is suitable for long term growth.

2. Income funds: This helps to provide regular and steady income for investors.

- Generally invested in fixed income assets.

- Value is appreciated in a limited.

- Therefore, it is suitable for retired people, seeking a source of regular income.

3. Balanced funds: It helps to balance growth as well as income. It divides the investment into capital appreciation and fixed income assets.

- The investor decides the proportion of investment.

- Thus, this is suitable for investors who are willing to take risks, but at the same time receive steady income.

 

Mutual funds based on structure: 

 

1. Open ended schemes:  It allow investors to buy or sell units at any point in time- doesn’t have a fixed maturity date.

You can deal directly with the investment and redemption of the mutual fund. (the time period being 30 days)

2. Close ended scheme: This type has a specified maturity period, while providing investors a stipulated time to invest during the initial launch period.

Once the offer closes, new investments are not allowed. Thus, the redemption periods are provided as exit routes to investors. (the time period being 3-7 years)

3. Interval scheme: It operates as a combination of open and close ended schemes- allowing investors to trade units at established intervals.

They may be traded on a stock exchange or can even be open for sale or redemption at such intervals. (the time period being 1-5 years)

 

Mutual funds based on asset class:

 

1. Equity funds: A type of mutual fund which invests a minimum of 65% of its assets in equity and its related instruments. 

- The rest of the balance (0-35%) can be invested in debt or money market securities. 

- Equity funds invest in stocks of companies which are responsive to changes in the economy & the stock market. Thus, they generally yield high returns.

2. Debt funds: A type of mutual fund which invests less than 65% of its total assets in debts.

- Investors prefer them due to its lower levels of risk and steady interest income. 

- The most popular type of debt fund in India is liquid fund, often used by corporations in order to park their surplus cash for short time periods- with maturities up to 91 days.

3. Hybrid funds: A hybrid funds are a type of mutual fund which invests in two or more asset classes, that include equities, debts, golds, overseas securities, etc.

- Generally, a hybrid fund only invests in two asset classes: Equity and debt - since the blend enables a hybrid fund to give similar benefits as those two.

- Although, there are about 7 types of hybrid funds: the most popular is the dynamic asset allocation fund. 

- It has the flexibility to invest 0%-100% of its assets in either debt or equity.

Types of Mutual Funds in India

Mutual funds - Guide to your first investment

 

1. Fix your investment goal: Firstly, you need to decide how much you should set aside towards investing and analyzing your risk profile. It’s better to invest with a purpose, always!

2. Choose the right type of mutual fund: As mentioned above, investing with a purpose will guide you to choose the type of mutual fund required for your end-goal. But make sure, you take your time and choose the right type of mutual fund. 

3. Try to diversify your portfolio: A diversified portfolio will even out risks and if one asset under-performs, the others could make up for the loss!

4. Keep your KYC documents updated: We required KYC for most financial transactions in India as it is a government regulation. Make sure you become KYC compliant.

5. Open a net banking account: This would help you allow investments to be made through debit cards and cheque. It will also make the process easier and more straightforward.

6. Seek advice from an expert: It is always better to learn and acquire help from experts when it comes to your financial well-being. This entire process can be extremely tedious and overwhelming. Therefore, try to get help from an expert so you don’t miss out on the small details.

 

Online options 

It makes investing in mutual funds as easy as sitting at the comfort of your own home due to advancements in technology.

There are various websites that provide you with different types of mutual funds, schemes and extra benefits! 

You just need to fill our 2-3 forms and you would be good to go! 

Thus, you can not only save time and energy, but also the hassle of physically going to companies to find the best deal. 

Undoubtedly, investing in mutual funds online can be a great way of starting your financial expedition for your future goals. 

Types of Mutual Funds in India

Mutual funds for tax benefits

 

It should be noted that under section 80C- investments in certain mutual funds can actually qualify for deduction from your taxable income. Click here to know more about this.

  • You need to make sure, the scheme is equity oriented as they are specifically designated as tax saving schemes, for example, Equity linked savings schemes (ELSS). 
  • Once the portfolio has been created, the investor must make sure to fund in the investments every financial year to avail the tax benefits for that particular year. 

In fact, this is a win-win situation as your money is yielding high returns and at the same time, you’re paying reduced taxes!

 

A closing thought

 

In conclusion, investing in mutual funds can do you wonders! Not only is it a good source of investing in your financial future, but it gives you the possibility to do so at your own comfort.

Since, there are various types and schemes, it is easier for you to find and customize your own plan to suit your goals.

Investing in mutual funds involves lower risk than investing in stocks. It also provides you with tax benefits- practically making you wealthier by helping you make and save money at the same time.

Therefore, it seems like a great idea to invest in mutual funds due to the many benefits it provides. 

 


Enter your details and request a FREE ADVISORY CALLBACK to know more about the best mutual fund scheme for you.

Open chat
1
Chat 24x7
Hello, My name is Leena :)

Would you like to get a free portfolio review?

Or just ask me anything.. I will reply within minutes!