Types of Mutual Fund based on Asset Classes

In Mutual Fund broadly two types of funds available. First, Open-Ended and Second Close Ended

Open Ended

  1. Debt/ Income – In a debt/income plan, a major part of the investable fund are invested in debenture, government securities, and other legal documents. Although capital appreciation is low compared to equity this is a low risk-low return investment avenue which is ideal for people seeing a steady income.
  2. Money Market/ Liquid – This is ideal for those who looking to use their excess money in short term plan while waiting for better options. In these plans, investment had done in short period & looking for a reasonable return.
  3. Equity/ Growth – Equities are a popular category among retail Investors although it could be a high-risk investment Short Period. They can expect capital appreciation in the long run. If you are at your most important earning stage and looking for long-term benefits, growth plan could be an ideal investment.

3.i. Index plan – Index plan is a widely popular style in the west. These follow passive investment style where your investments copy the movements of benchmark indices like Sensex, Nifty etc.

3.ii. Sector wise Investment – Sector wise funds invested in a clearly in Sector wise fund like IT, drugs, Petrochemical, Retail, Banking etc. or Sector of the capital market like large caps, mid caps, etc. This plan provides a high risk-high return opportunity within the equity space.

3.iii. Tax Saving – As the name suggests, this plan offers tax benefits to its Shareholder. The money is invested in equities are offering long-term growth opportunities. Tax saving funds (called Equity Linked Savings plans) has a 3-year lock-in period.

  1. Balanced plan- This balanced plan allows the customer to enjoy growth and income at regular periods of time. Money is invested in both equities and fixed income securities; these are ideal for the aggressive investors.

Closed-Ended

In India, this type of close –ended plan has a specified maturity period customer can invest only during the first launch period is known as the NFO (New Fund Offer) period.

  1. Capital Protection – The first goal of this plan is to safeguard the principal amount while trying to deliver reasonable returns. These invest in high-quality fixed income securities with little-bit exposure to equities and mature along with the maturity period of the time.
  2. Fixed Maturity Plans (FMPs) – FMPs, as the name suggests, are an investment with a defined maturity period. These schemes contain normal debt instruments which mature with the maturity of the plan. Here investors earning depends on securities coupons.

III. Period of time – Operating as a combination of open and closed ended plans; it allows people to trade units at a pre-defined time. 

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