Types of Mutual Funds:

Types of Mutual Funds Explained: A Comprehensive Overview

Investing in equity mutual funds is very risky, as the full amount will be invested in the Equity Market butt these funds have the capability to generate higher returns compared to other funds.
These types of funds are suitable for long-term goals.

Subcategories:

Large-Cap Funds: Focus on large, established companies with stable performance.
Mid-Cap Funds: Invest in medium-sized companies that have significant growth potential.
Small-Cap Funds: Target smaller companies, which may provide higher growth opportunities but come with increased risk.

Balanced Funds are also known as hybrid funds with money invested in both stocks and bonds.
These funds are ideal for those people who are looking for a mixture of safety, income, and modest capital appreciation.

Types:

Aggressive Hybrid Funds: Invest a higher percentage in equities for greater growth potential.
Conservative Hybrid Funds: Allocate more to debt to minimize risk.

Top Balanced Fund To Invest In 2023 (Source: Policybazaar):

Funds	Five Year Returns	Three Year Returns	Required Investment
Equity Direct fund Kotak	14.86%	20.65%	₹5000
Prudential Equity & Debt fund ICICI	16.41%	19.67%	₹5000
Equity & Bond fund DSP	13.6%	19.55%	₹500
SBI Equity Hybrid Fund-Direct Plan-Growth	15.09%	18.66%	₹1000
Mirae Asset Hybrid- Equity Fund-Direct Plan-Growth	16.62%	18.92%	₹5000

ELSS funds are also known as the Tax Saving Mutual Funds.
All Investors can claim deductions up to Rs 1.5 lakh a year with the ELSS funds as per Section 80C of the Income Tax Act, 1961.
In these types of funds, there’s no maximum limit to invest, and can generate higher returns when compared to the PPF and NPS.

Top Best ELSS Funds to Invest in 2023 as per Cleartax data: Based on the past 5-year returns:

Mutual fund	5 Yr. Returns	3 Yr. Returns	Min. Investment
Quant Tax Plan – Direct-Growth Plan-Growth	0.2296	0.4039	₹500
SBI Tax Advantage Fund Series III Direct Growth	0.2764	0.375	—
SBI Tax Advantage Fund Series III Regular Growth	0.2696	0.3678	—
Quant Tax Plan Payout of Income Distribution cum capital withdrawal option Option Direct Plan	0.2121	0.3543	—
SBI Long Term Advantage Fund Series IV Direct Plan-Growth	—	0.3523	—
SBI Tax Advantage Fund Series II Growth	0.2525	0.3455	—
SBI Long Term Advantage Fund Series IV Regular Plan-Growth	—	0.3451	—
Quant Tax Plan Reinvestment of Income Distribution cum capital withdrawal option	0.1948	0.3311	—
Quant Tax Plan Payout of Income Distribution cum capital withdrawal option	0.1948	0.3311	—
Quant Tax Plan-Growth	0.1942	0.3299	—

Definition: These funds aim to replicate the performance of a specific market index, such as the S&P 500.
Objective: Designed for passive investors, index funds generally have lower management fees and seek to achieve market returns.
Characteristics: They typically exhibit lower volatility and expenses compared to actively managed funds.

Definition: These types of mutual funds focus on specific sectors of the economy (e.g., technology, healthcare) or investment themes (e.g., sustainability).
Objective: Aimed at investors who believe in the growth potential of specific sectors or themes.
Risks: Sectoral funds can be more volatile, as they are tied to the performance of a particular market segment.

Liquid funds are also known as short-term and ongoing funds.
Liquid funds generate very few returns but have almost no risk and provide 100% returns.
There’s zero exit load in these kinds of funds.

5 Top Liquid Mutual Funds in India to Invest in 2020: (Source: ClearTax)

Fund Name	AUM (cr.)	1 Year Returns	3 Year Returns	5 Year Returns
Aditya Birla Sun Life Liquid Fund	₹40,835	6.70%	6.99%	7.43%
Axis Liquid Fund	₹29,119	6.61%	6.98%	7.39%
Nippon India Liquid Fund	₹24,235	6.69%	7.00%	7.42%
Franklin India Liquid Fund	₹12,529	6.85%	7.07%	7.49%
Baroda Liquid Fund	₹6,071	6.62%	7.00%	7.46%