What are the various types of funds?

What are the various types of funds?
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Mutual Funds Sahi Hai?

Various types of Mutual Funds exist to cater to different needs of different people. Largely, they are of three types.

  1. Equity or Growth Funds
  • These invest predominantly in equities i.e. shares of companies
  • The primary objective is wealth creation or capital appreciation.
  • They have the potential to generate higher return and are best for long term investments.
  • Examples would be
    • “Large Cap” funds which invest predominantly in companies that run large established business
    • “Mid Cap” funds which invest in mid-sized companies.
    • “Small Cap” funds that invest in small sized companies
    • “Multi Cap” funds that invest in a mix of large, mid and small sized companies.
    • “Sector” funds that invest in companies that are related to one type of business. For e.g. Technology funds that invest only in technology companies
    • “Thematic” funds that invest in a common theme. For e.g. Infrastructure funds that invest in companies that will benefit from the growth in the infrastructure segment
    • Tax-Saving Funds
  1. Income or Bond or Fixed Income Funds
  • These invest in Fixed Income Securities, like Government Securities or Bonds, Commercial Papers and Debentures, Bank Certificates of Deposits and Money Market instruments like Treasury Bills, Commercial Paper, etc.
  • These are relatively safer investments and are suitable for both Capital Protection and Income Generation.
  • Examples would be Liquid, Short Term, Floating Rate, Corporate Debt, Dynamic Bond, Gilt Funds, etc.
  1. Hybrid Funds
  • These invest in both Equities and Fixed Income, thus offering the best of both, Growth Potential as well as Income Generation.
  • Examples would be Aggressive Balanced Funds, Conservative Balanced Funds, Pension Plans, Child Plans and Monthly Income Plans, etc.
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