There are many mutual funds available for investors to pick based on their financial objectives and risk appetite. The following are the categories of mutual funds -
## Based on Asset Class #### Equity Mutual Funds The majority portion of money in these funds is invested in company stocks. Because the returns are linked to market movements, they are inherent to a higher degree of risk. Therefore, understanding of associated risks is necessary. There are different types of [equity mutual funds](https://www.sigfyn.com/learning-center/types-equity-mutual-fund) based on their investment style, market capitalization and portfolio holdings.
Debt Mutual Funds
These funds are also known as fixed-income funds, where the majority of the corpus is invested in debt instruments like government securities, debentures, corporate bonds and money market instruments. These funds aim to provide reasonable returns to investors with relatively low risk. Moreover, there are different types of debt mutual funds based on the securities they invest in and their maturity period.
Hybrid Mutual Funds
These funds invest in equity and debt instruments depending on the fund's investment objective. The fund aims to give diversified exposure to various asset classes. Moreover, there are different types of hybrid mutual funds based on portfolio asset allocation.
Based on Structure
Open-ended Mutual Funds
This fund is available for subscription and redemption every business day. Thus, these funds have no maturity day.
Closed-ended Mutual Funds
This fund is available for subscription only during the offer period. They have a fixed tenure and a fixed maturity date. Hence, these funds can be redeemed only on maturity. Moreover, it is mandatory for these funds to be listed on the stock exchange after the new offer period. This helps investors to exit the scheme before maturity by selling their units on the exchange.
Based on Portfolio Management
Actively Managed Funds
The fund manager actively manages the fund portfolio deciding which stocks to buy/sell using his market expertise backed by research. Also, they aim to generate maximum returns and outperform the scheme's benchmark returns.
Learn more about SBI Mutual Funds
Passively Managed Funds
The fund manager aims to replicate the scheme's benchmark index in the same proportion. The fund manager does not perform research or analysis to buy and sell stocks. They merely replicate the index holdings. Thus, they aim to generate the same returns as the benchmark index.
Based on Investment Objective
Growth-Oriented Funds
The primary objective of these funds is to ensure capital appreciation in the medium and long term. The fund manager predominantly allocates the corpus in equities and shuffles the portfolio to reap the benefits of market movements.
Income-Oriented Funds
The primary objective of these funds is to generate regular income where the underlying assets also ensure steady returns. The fund manager predominantly allocates the corpus in fixed-income securities. However, these products have limited potential for wealth creation for a particular period.
Liquid Mutual Funds
The primary objective of this scheme is to ensure capital protection, liquidity and reasonable returns.
Tax Saving Mutual Funds
These funds are typically Equity Linked Savings Schemes (ELSS) that invest in equity and equity-related instruments. Investing in this scheme makes you eligible for deductions under Section 80C of the Income Tax Act 1961.
Based on Speciality
Index Mutual Funds
These funds are a class of mutual fund schemes that tracks and replicates the asset allocation and performance of a specific benchmark index. These are passively managed funds where 95% of total assets are similar to the index that it is tracking.
Funds of Funds (FOFs)
As the name suggests, these funds invest in other mutual funds (domestic or international). They are also known as multi manager funds. In other words, the pooled money is invested in other mutual funds rather than assets like equity or debt. Also, the returns may vary depending on the performance of the target fund.
Commodity Mutual Funds
These funds invest in commodities like agricultural products, raw materials, metals, etc. The returns are based on the performance of the commodity that the fund is tracking. For instance, gold mutual funds invest in gold which is a commodity.
Asset Allocation Funds
These funds are more like balanced funds where the fund manager balances between equity, debt or sometimes even gold. The asset allocation ratio depends on the market conditions and fund investment objective. Also, the fund manager aims to distribute the burden or risk and enhance the scope of earnings.
Read More about Mutual Funds Sahi Hai
Pension/Retirement Mutual Funds
These funds help to gain regular returns after retirement. The fund splits its investment between equity and debt instruments where the equity component offers returns and the debt component helps balance risk with steady returns.
Children's Fund
This is an open-ended scheme for children having a lock-in period for 5 years or till the child attains majority (18 years), whichever is earlier. Also, these work like hybrid funds with exposure to both equity and debt instruments. It aims to create wealth for children for various purposes like education or marriage.
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