Types of Mutual Funds:
Types of Mutual Funds Explained: A Comprehensive Overview
1) Equity Mutual Funds or Long Term Funds:
- 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.
2) Balanced Funds:
- 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 |
3) Fixed Income Funds:
- These types of mutual funds are good for the medium term and are less risky.
- The money in these funds is not invested in equity funds.
- Good fund for earning extra income to complete your daily needs.
4) ELSS Mutual Funds:
- 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 | — |
5) Index Funds:
- 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.
7) Sectoral 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.
6) Liquid Funds:
- 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% |
You can invest in mutual funds through 3rd party applications or by visiting directly to the Mutual fund companies’ websites.
You can also make use of ET-money, Fisdom, Angel Bee applications or websites to invest in mutual funds.
To invest in Direct mutual funds use Mycams, Zerodha application or website.
Also, you can give requests to cancel, redeem and switch funds online or through the Application anytime.
Also, Read at knowandask:
ELSS Mutual Funds in India Save Tax While Creating Wealth.
Liquid Mutual Funds in India for Safe and short investment.
