All about Mutual Funds and its various types


Do you want to know what is mutual fund and various types of mutual fund available in India? This article gives information about mutual fund, definition for different types of mutual funds and examples for each type of mutual fund.

What is Mutual Fund?


Mutual Fund is a scheme which is run by Mutual Fund houses. As part of this scheme, Mutual Fund houses collects money from people / investors and invest it various bonds, stocks, etc and return the profit back to people. Mutual funds are managed by fund managers. Various Mutual Fund Houses are available in India and HDFC Mutual Fund, IDFC Mutual Fund, Reliance Mutual Fund, Franklin Templeton India are some of the well known fund houses in India.
Various mutual fund schemes are available in India and it is defined based on the investment objectives. Below refer some of the mutual fund types.

Equity Mutual Funds


This type of mutual funds invest the money in various companies which are listed in NSE / BSE. Fund managers will do detailed research of the company before invest in them. Equity funds further classified into multiple types based on market capitalization and their investment style. No assurance for gains and it is linked with performance of the company in which the amount is invested. Share price will go up in case of good performance and then fund value also get increased.
Based on market capitalization equity funds are further classified as below

Large Cap Mutual Funds


This kind of mutual funds will invest only in large cap stocks. Stocks which are having more than Rs 200bn as market capitalization is called as Large cap stocks. These stocks have huge market presence and safe for investments. HDFC Bank, SBI, Tata Motors, Infosys, TCS, etc are few examples for Large cap stocks.
Below are the few examples for Large cap funds
  1. HDFC Top 200

  2. Mirae Asset India Opportunities fund

  3. Quantum Long Term Equity fund

  4. SBI Blue Chip fund


Mid-Cap Mutual funds


This kind of mutual funds will invest only in Mid-cap stocks. Stocks which are having the market capitalization between Rs 50bn to Rs 200bn are called as Mid-cap stocks. This kind stocks are will be considered as risk compared to large cap stocks. Mindtree, Ashok Leyland, etc are few examples for Mid-cap stocks.
Below are the few examples for Mid-cap funds
  1. Mirae Asset Emerging Blue chip fund

  2. HDFC Midcap opportunities

  3. UTI Mid-cap fund

Small Cap Mutual funds


This kind of mutual funds will invest only in small cap stocks. Stocks which are having the market capitalization less than Rs 50bn are called as small cap stocks and these stocks are usually start up companies and very risk compared to Mid-cap and Large cap. NIIT Tech, Aban Offshore, etc are few examples for Small cap stocks.
Below are the few examples for Small cap funds
  1. Franklin India Smaller Companies fund

  2. Reliance Small cap fund

  3. DSP BR Micro cap fund

Multi Cap Mutual funds


The funds which are having investment in Large, Mid and Small cap stocks are called as Multi Cap funds.
Below are the few examples for Multicap funds
  1. Franklin India High Growth companies fund

  2. ICICI Value Discovery fund

  3. SBI Magnum Multi-cap fund

Equity Linked Saving Scheme (ELSS) :


ELSS is one kind of Equity mutual fund and major portion of this funds will be invested in equity. ELSS funds are having the locking in period for 3 years. Return of this fund will depends on stock market since most of the amount are invested in equities. Advantage of ELSS fund is that the investor can show this
investment under 80C up to the limit of 1.5L.
Below are the few examples for ELSS funds
  1. Franklin Taxshield

  2. Axis long term equity fund

  3. Reliance Tax Saver

Liquid Funds:


Liquid funds is another version of debt mutual funds but they will invest in short term market instruments which will get maturity within 90 days like government securities and treasury bills, etc. As mentioned in the name, liquidity is the main purpose of these funds.
Below are the few examples for Liquid funds
  1. SBI Premier Liquid

  2. ICICI Pru Money Market Fund

  3. HDFC Liquid Fund

Balanced funds:


Balanced Mutual funds are hybrid funds and it will invest both in stocks and debt instruments like bonds, securities. Usually 70% of the amount will be invested in equities and remaining portion will be invested in debt components. Risk in return will be low compared to equity funds, but still is is considered as risk investment since major portion of the amount is getting invested in equities.
Below are the few examples for Balanced funds
  1. Franklin balanced fund

  2. HDFC balanced fund

  3. Tata balanced funds

Debt Funds:


Debt mutual funds will invest the amounts in fixed income securities such as Corporate bonds, Government securities, Treasury bills and Money market instruments. Monthly Income Plans(MIP), Fixed Maturity Plans(FMP), Short Term Plans, Gilt fund are some of the available investmet options under the category of debt funds. Usually Debt funds will be prefered by the investors who are not ready to take risks. Debt mutual funds will give stability in investment portfolio.


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Comments

Author: umesh06 Feb 2017 Member Level: Gold   Points : 1

The writer has illustrated in a crisp and comprehensible manner the various categories of mutual fund investments and their composition of invested funds in equity or debt.
The article is quite useful for the investors in this area.
I will suggest if author can update the information by giving details of tax implications on dividend income or on selling in market or on maturity in different types of mutual funds.
Overall a good article.

Author: Partha Kansabanik10 Feb 2017 Member Level: Diamond   Points : 5

The author has discussed in brief about equity mutual funds, debt mutual funds, ELSS, liquid funds and balanced funds. The article would be helpful for initial/first-time investors in mutual funds. However, I would like to state that the author has not discussed the tax treatment in respect of equity mutual funds, debt mutual funds and hybrid funds. The information about tax treatment would be much more helpful for the investors. Investment in equity mutual funds is tax-free after one year. Investment in debt mutual funds gets indexation benefits after three years. The equity linked hybrid funds gets tax benefits like equity mutual funds. Similarly, debt-oriented hybrid funds (MIPs) get indexation benefits after three years.

In this connection, I would further like to state that I have already written following articles on various types of mutual funds (link can't be given as it is not allowed in Article responses). Interested readers may go through these seven articles for in-depth knowledge on mutual funds.
(a) Tax treatment of mutual funds in India
(b) Hybrid mutual funds - why to invest
(c) Debt Mutual Funds-Types and Investment Philosophies
(d) Different Types of Equity Mutual Funds
(e) How to measure mutual fund risks – five statistical tools
(f) Top five tips to pick good mutual funds
(g) Different Types of Equity Mutual Funds

Concluding my response, I congratulate the author for this brief and useful article for first-time mutual fund investors.

Guest Author: Valmir04 Jun 2017

The mutual funds flash quotes page give the mutual fund investor a rapid, concise means of comparing the NAV of many funds at one go. This can be helpful in quickly isolating those funds worthy to check out. I read this at a website.



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