What are the Different Types of Mutual Fund Schemes Present in India?

Mutual fund schemes mobilize money from investors and invest the accumulated corpus in various markets and securities. Typically, a fund announces its investment objective and then seeks investments from the public. Let us understand the different types of mutual fund schemes present in India.Mutual fund schemes may be categorized:

1. Open-ended funds - are open for investors to enter and exit as and when they like.
2. Close-ended funds - limit entry into the scheme only during the offer period, after which units of the scheme can be traded on the stock exchange.
3. Interval funds - are largely close-ended but become open-ended during certain pre-specified intervals, known as the transaction period.

1. Actively managed funds - are managed by a portfolio manager, an expert and an experienced professional, who is entrusted with the responsibility of building the portfolio of the fund within the parameters of the scheme’s investment objective.
2. Passive funds - aim to track the performance of a specified index and thus do not have an active role for the fund manager.

1. Equity mutual funds - invest in equity instruments issued by companies. They can be classified based on the market size of the companies that they invest in(large cap, mid cap, small cap, multi cap) or the sector or theme they focus on (sector funds, thematic funds) or the strategy adopted by the fund manager (diversified equity funds, dividend yield schemes, growth funds, focused funds).
2. Debt mutual funds - invest in debt securities. They may be categorized based on the issuer of the debt securities. For instance, gilt funds invest in government securities; corporate bond funds invest in bonds issued by companies and PSUs. Debt funds can also be classified based on the tenure of the debt instruments like liquid funds(securities mature within 91 days) medium duration funds, short-term funds, etc. Some debt funds are classified based on the investment strategy like fixed maturity plans, credit risk funds, etc.
3. Hybrid mutual funds - invest in a combination of asset classes such as equity, debt, gold, etc. They include balanced advantage funds, aggressive hybrid funds, conservative hybrid funds, monthly income plans, capital protected schemes, etc.

1. Retirement funds - solution-oriented schemes that have a lock-in period of five years or till the investor’s retirement age (whichever is earlier)
2. Children’s Funds - have a lock-in for at least five years or till the child attains majority age, whichever is earlier.
3. Equity Linked Savings Schemes - are equity funds that offer tax benefits to investors under section 80 C of the Income Tax Act up to a limit of Rs. 1.5 lakh per annum

1. Based on their structure Depending on how the scheme is structured, it may be open to accepting money from investors, either during a limited period or at any time.
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3. Based on how they are managed Mutual fund schemes may or may not be actively managed by a dedicated fund manager.
4. Based on their asset allocation The risk and return in the scheme depend upon the allocation in each asset class.
5. Based on the solutions they provide

Different investors have different investment goals, liquidity needs, and risk appetites. To accommodate these preferences, a wide range of mutual fund schemes have been launched in the market.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.