Different Types of Mutual Funds Categories

Mutual funds are categorized into different types based on the investment objective, structure, and the asset class. They are classified into Equity Mutual Funds, Debt Mutual Funds, Hybrid Funds, and Other Specialized Funds. Let's know the detailed breakdown of different types of mutual funds.

1. Equity Mutual Funds

These are the funds which primarily invests in the stocks of companies listed on the stock exchanges (NSE and BSE) to provide the long-term capital gains. These funds are ideal for those investors with a high-risk tolerance and long-term investment vision.

Large Cap Funds: Large cap funds which basically invest in companies with a largest market capitalization. For example, top 50 or top 100 biggest companies of India.

Mid Cap Funds: Mid cap funds which basically invest in companies which are larger market capitalization. For example, top 100 to 200 largest companies of India.

Small Cap Funds: These funds invest in small-sized companies compare to mid-cap companies. For example, top 200 to 500 largest companies of India.

Sectoral/Thematic Funds: These funds invest in specific sectors (e.g., IT, Pharma, railway, defence, infrastructure).

Index Funds: These funds will track a particular index, such as the Nifty 50, Sensex or Nifty bank.

ELSS (Equity Linked Savings Scheme): These are the tax-saving funds which comes under Section 80C of the Income Tax Act, which offers tax benefits along with equity exposure with 3 years of lock in period.

2. Debt Mutual Funds

Debt mutual funds invest in fixed-income securities like bonds, government securities, corporate bonds, or money market instruments.

Short-Term Debt Funds: Invest in debt instruments with short maturities, generally under 3 years.

Long-Term Debt Funds: Invest in bonds with longer maturities over 3 years, which are more sensitive to interest rate movements.

Liquid Funds: These funds invest in short-term instruments with very short maturity periods up to 91 days.

Gilt Funds: Invest exclusively in government securities (G-Secs). These funds are considered low risk as they are backed by the government.

Credit Risk Funds: These funds invest in lower-rated corporate bonds. They provide higher returns but come with higher risk.

3. Hybrid Mutual Funds

Hybrid mutual funds are mutual funds that invest in both equity (stocks) and debt (bonds), and sometimes invests in other assets like gold or real estate.

Aggressive Hybrid Funds: These funds primarily invest in equities around 65-80% and the remaining in debt. These are suitable for investors with moderate to high-risk tolerance.

Conservative Hybrid Funds: These funds invest more in debt (70-80%) and the rest in equity. These funds are suitable for conservative investors.

Balanced Advantage Funds: These funds dynamically allocate between the equity and debt by the fund manager based on the market conditions.

Multi-Asset Allocation Funds: These invest in more than two asset classes like equity, debt, and gold. They will provide a diversified approach to investing.

4. Specialized Mutual Funds

These funds are designed for specific investment needs or asset classes.

Fund of Funds (FoF): Invest in other mutual funds rather than directly in stocks or bonds. This allows investors to diversify across various funds.

International Funds: Invest in international markets by providing exposure to the global stocks or bonds.

Real Estate Mutual Funds (REITs): These funds invest in real estate properties or Real Estate Investment Trusts (REITs), offering investors the chance to invest in real estate without direct involvement.

Commodities Fund: Invest in commodities like gold, silver, or oil. These funds help investors to hedge against inflation or economic volatility.

5. Exchange-Traded Funds (ETFs)

ETFs are similar to mutual funds, but they trade on the stock exchange like an individual stocks. They typically track a specific index or commodity. ETFs offer liquidity, transparency, and lower fees compared to traditional mutual funds.

Equity ETFs: Track a specific equity index.

Bond ETFs: Track bond index or bond portfolio.

Commodity ETFs: Tracks commodities like gold or oil.

6. Other Types of Funds

Tax-Saving Funds (ELSS): These are primarily equity-oriented funds that provide tax benefits under Section 80C. They come with a lock-in period of 3 years.

Children’s Funds: Designed for investing on behalf of children, these funds typically focus on long-term growth to fund education or marriage.

Retirement Funds: These funds are designed to generate income and wealth for retirement. These funds come with minimum 5 years of lock in period.
Disclaimer: This information is for educational and information purposes only and should not be considered financial advice. Do your own research before making any investment decisions.