There is a reason why Mutual Funds are one of the most popular and most talked about investment option for normal public who don’t have detailed knowledge about the stock market. Mutual Funds are there for all the requirements and you can choose to invest in the one which meets your goals.
Mutual Funds can be divided into the different types on the basis of-
1- Asset Class
3- Investment Goals
Let’s discuss the types depending upon the above-mentioned divisions-
On Basis of Asset Class- This basically means in which market the money will be invested in. So, there are
a. Equity Funds
This type of fund primarily invests in stocks. The pooled money is invested in the stocks of different companies by the fund managers. The gain in these funds is significantly higher but the risk is also a bit higher.
b. Debt Funds
This type of fund invests primarily in fixed-income securities like bonds, securities and treasury bills. They invest in various fixed income instruments like Fixed Maturity Plans (FMPs), Gilt Funds, Liquid Funds, Short-Term Plans, Long-Term Bonds and Monthly Income Plans etc.
c. Money Market Funds
The fund manager invests your money and disburses regular dividends reciprocally. Choosing a short-term plan (not quite 13 months) can lower the danger of investment considerably on such funds.
d. Hybrid Funds
Hybrid funds are suitable for investors looking to require more risks for ‘debt plus returns’ benefit instead of sticking to lower but steady income schemes.
On the basis of structure- It basically means flexibility to buy and sell the Mutual Fund units.
a. Open-Ended Funds
These Funds are not restricted with any time limit or number of units. These units can be kept for any period of time and can be traded openly.
b. Closed-Ended Funds
For these funds, the units are predefined and the company cannot sell more than pre-agreed number of units.
c. Interval Funds
These types of funds are a combination of both types. These can be sold in intervals which are usually 3-month period.
On the basis of Investment Goals- This is basically fund for the goals. You invest on goals for different investment goals.
a. Growth Funds
b. Income Funds
c. Liquid Funds
d. Tax-Saving Funds
e. Aggressive Growth Funds
f. Capital Protection Funds
g. Fixed Maturity Funds
h. Pension Funds
Based on Risk Factor- It Is very simple, if there is a bigger reward in short period of time, then there will also be a bigger risk.
a. Very Low-Risk Funds
b. Low-Risk Funds
c. Medium-Risk Funds
d. High-Risk Funds