Mutual Funds
What is Mutual Funds?
From a technical standpoint, a mutual fund serves as an investment instrument that aggregates funds from investors, subsequently investing these pooled funds into diverse assets such as stocks, bonds, money market instruments, and others, in accordance with the fund’s mandate. Investors entrust their money to the Asset Management Company (AMC) with the understanding that it will be professionally managed by fund managers. These fund managers commit to investing the funds in a specified manner. Regulatory bodies, such as the Securities and Exchange Board of India (SEBI) and the Board of Trustees, play a crucial role in ensuring the fulfillment of this commitment.
1. Equity funds
These funds channel their investments into various types of stocks, encompassing growth stocks, momentum stocks, value stocks, income stocks, large cap stocks, mid cap stocks, small cap stocks, and more, depending on the fund’s designated investment objective.
Consequently, we observe subcategories such as:
- Large Cap Fund
- Large & Mid Cap Funds
- Mid Cap Funds
- Small Cap Fund
- Multicap Fund
- Equity Linked Savings Schemes (ELSS)
- Value Fund
- Focused Fund
- Exchange-Traded Funds (ETF)
- Dividend Yield Fund
- Arbitrage Fund
- Sectoral Funds: These focus on stocks within a specific sector, such as Pharma Fund or Banking Fund.
- Thematic Funds: These revolve around particular themes like Infrastructure Funds or Energy Funds.
2. Debt funds
These funds invest money in bonds and money market instruments. These funds may invest into long-term and/or short-term maturity bonds.
- Short Duration Funds
- Medium Duration Funds
- Medium to Long Duration Funds
- Long Duration Funds
- Dynamic Bond Fund
- Corporate Bond Fund
- Ultra Short Duration Funds
- Low Duration Funds
- Money Market Funds
- Liquid Funds
- Credit Risk Funds
- Banking & PSU Funds
- Floater Funds
- Gilt Funds
- Gilt Funds with 10 year constant duration
3. Hybrid funds
These funds invest in a mix of both equity and debt.
- Aggressive Hybrid funds, in order to retain their equity status for tax purposes, generally invest at least 65% of their assets in equities and roughly 35% in debt instruments, failing which they will be classified as debt oriented schemes and be taxed accordingly.
- Balanced Advantage
- Equity Savings Fund
- Conservative Hybrid Fundfall within the category of hybrid funds. MIPs invest up to 25% into equities and the balance into debt.
4. Real Asset funds
These funds invest in physical assets such as gold, platinum, silver, oil, commodities and real estate. Gold Exchange Traded Funds (ETFs) and Real Estate Investment Trusts (REITs) fall within the category of real asset funds.