Types of mutual funds in india

You want to invest in bonds, stock or other similar assets, but you don't have the necessary big investments to do it alone? The mutual fund is the solution for you, there you, along with other people will be able to participate in big investments and collect you share of the winnings.

The mutual funds are the way the smaller investors can - invest; they consist of assets, collected from different investors with one goal - to be used for generating more capital. The collected funding are controlled by money manager, who uses them to generate more capital for the fund's investors. The mutual funds are usually structured and have objectives right from the start, and they are rarely changed. This complicated explanation, in fact, says that you, along with other investors can be part of the big stock game. The investments you put in the fund allow you to participate in the future winnings of the fund, but also in eventual losses.

Investing on mutual funds is very popular, they can offer fast and long-term income, where both have their details - advantages and disadvantageous.

In India there are some main types of mutual funds, based on "maturity period" of the investment:

  • The Open-Ended Mutual Funds - this type has no fixed maturity value, the investor can sell or buy assets in any moment of the investment period.
  • The Open-Ended Mutual Funds - this type has no fixed maturity value, the investor can sell or buy assets in any moment of the investment period.
  • Income/ Debt - here the assets are mainly invested in government securities; the risk is very low and the future return is lower, compared with the equity investments. Still, it is highly preferred from these, who want stable income.
  • Liquid/ Money Market - ideal for short term investment, recommended, while you wait for the good opportunity. It brings fast and reasonable income to the investor.
  • Equity/ Growth, which can be three types. Despite the high risk, equity is preferred from retailers and investors, who need fast income, with an option for higher long term return. If you just start you might appreciate a growth scheme in your investments. The equity has three schemes - Index, Sectoral and Tax saving; where the Index is used in the west and is in fact passive investment. The Sectoral - the investments are made in particular industrial sector and the Tax saving is tax saving plan, with 3 year lock-in.
  • The balanced investment is also an open ended and is the best option for an investor - it ensures both - short term income and regular steady return.
  • Closed-ended Mutual Funds - in India, it has fixed maturity period and the investors can make changes, sell or buy, only during a fixed initial period of the investment.

  • Fixed Maturity Plans - they are with fixed maturity as the name says; usually these are investments, which bring return using interest rate ( coupons). It is mainly passive investment and brings lower income, that the active managed investments.
  • Capital protection - it does everything to preserve the initial investment, while trying to generate more capital.
  • The third is the so called Interval type, which allows investors to use both open and closed ended funds in some periods.