What are the different Types of Mutual Funds in India?

Mutual Funds are among the most profitable investment avenues available in the market. No matter what kind of investor you are, mutual funds will fit your investment style. Mutual funds are a very versatile investment scheme that allows an individual to invest according to this risk appetite and financial needs. Mutual funds come in a wide variety so as to fulfil the needs of every investor. If you want to make the most out of investments, choosing the right type of mutual fund is important. Each type of fund is managed through a different strategy and carries varying degrees of risks and rewards. To help you understand mutual funds better, here’s a list of the types of mutual funds in India:- 

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    Types of Funds based in Asset class

Equity Funds: - Equity Funds are they type of Mutual Funds that invest primarily in equity securities and equity related securities. The main objective of equity funds is to provide capital appreciation over the long term. They generally provide higher returns as compared to the other schemes but carries a higher risk as well. Investors who seek growth of capital over a long period of time should invest in Equity mutual funds. Equity funds come in types such as Diversified funds, Sector specific funds, and Index based funds.

Debt Funds: - These are the mutual funds that invest in debt instruments such as debentures and government bonds. Debt funds provide a fixed amount of returns and are considered as a safe investment. However, the returns provided by the Debt funds are on the lower side.

Balanced or Hybrid funds: - These mutual funds invest in a mix of asset classes i.e. debt and equity. The proportion of the investments in debt and equity can be adjusted according to the risk appetite of the investor. 

Types of Funds based on structure

Open Ended Funds: - In an open-ended mutual fund, the units are open for purchase and redemption at any time. Investors can choose to invest for any length of time without any limits on the amount of investment. They are an ideal investment for investors who require a high amount of liquidity for their investments. Asset management companies such as DSP Black Rock offer a variety of open-ended mutual fund schemes. 

Close-Ended Funds: - In a close ended mutual fund the units can only be purchased during the initial offer period and redeemed at a certain maturity date. These funds cannot be sold back to the fund Management Company and have to be put up in the stock markets for sale.

Interval Funds: - These funds have the features of both close-ended as well as open-ended mutual funds. They can be sold back to the fund management company during certain periods known as intervals.