Types Of Mutual Funds

Types Of Mutual Funds

By Structure

• Open Ended

These are schemes that do not have a fixed maturity. The mutual fund ensures liquidity by announcing sale and repurchase price for the unit of an open-ended fund.

• Closed Ended

These are schemes that have a fixed maturity. The money of the investor is locked in for the period. Occasionally, closed-end schemes provide a re-purchase option to the investors, either for a specified period or after a specified period. Liquidity in these schemes is provided through listing in a stock market; however this option is not yet available in India.

• Interval Schemes

These combine the features of open-ended and close-ended schemes. They may be traded on the stock exchange or may be open for sale or redemption during predetermined intervals at NAV related prices.

By Investment Objective

• Growth Schemes

Aim to provide capital appreciation over the medium to long term. These schemes normally invest a majority of their funds in equities and are willing to bear short term decline in value for possible future appreciation.

These schemes are not for investors seeking regular income or needing their money back in the short term.

• Income Schemes

Income Schemes Aim to provide regular and steady income to investors. These schemes generally invest in

fixed income securities such as bonds and corporate debentures. Capital appreciation in such schemes may be limited.

• Balanced Schemes

Aim to provide both growth and income by periodically distributing a part of the income and capital gains they earn. They invest in both shares and fixed income securities in the proportion indicated in their offer documents.  In a rising stock market, the NAV of these schemes may not normally keep pace or fall equally when the market falls.

• Money Market / Liquid Schemes

Aim to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer, short term instruments such as treasury bills, certificates of deposit, commercial paper and inter bank call money. Returns on these schemes may fluctuate, depending upon the interest rates prevailing in the market.

Other Schemes

• Tax Saving Schemes (Equity Linked Saving Scheme - ELSS)

These schemes offer tax incentives to the investors under tax laws as prescribed from time to time and promote long term investments in equities through Mutual Funds.Eligible for deduction under section 80C .Lock in period three years

• Index fund

Index fund schemes are ideal for investors who are satisfied with a return approximately equal to that of an index.