What Are the Different Types of Mutual Fund Options Available in India?

What Are the Different Types of Mutual Fund Options Available in India?

Mutual funds (MFs) are investment vehicles that pool money from multiple investors with common financial goals. The fund corpus is invested in different asset classes as per the scheme’s investment objective.

The Securities and Exchange Board of India (SEBI) formulated the MF regulations in 1996. Over the years, several fund houses have been set up in the joint and private sectors. Presently, about 45 companies handle investments over INR 10 lakh crore. 

Mutual funds in India are classified in various categories, such as: 

  • Equity funds

The corpus is invested in stocks and other equity products. Although these funds may offer better returns, the risks are higher, as the investments are subject to market volatility. Equity funds are further classified as:

  • Index funds

The money is invested in stock indices like the Sensex or the Nifty. The returns are in line with the index movement and are ideal if you have a moderate risk appetite.

  • Sector funds

These schemes invest in companies within a particular sector. Some of these include infrastructure, mining, banking, mid-cap, large-cap, and small-cap companies. The returns depend on the performance of the sector. You can consider investing in these funds if you are willing to assume high risks for better returns.

  • Debt funds

A majority of the money is invested in debt instruments, such as government bonds, debentures, and other fixed-income securities. Most of these schemes offer assured returns and are relatively low-risk.

  • Money market funds

The money is invested in liquid securities like treasury bills, certificates of deposit, and commercial papers. These schemes are safe investments. They are suitable if you want to park your money for quick but relatively moderate gains.

  • Balanced funds

The corpus is invested in debt and equity instruments to balance the risk-return on the scheme. Based on the investment objective, the majority may be invested in equities and balance in debt products or vice-versa.

Mutual fund online schemes can also be classified as: 

  • Open-ended funds

You can invest in this scheme at a particular point in time. Similarly, you can redeem your investment at any period, as these funds do not have a fixed maturity duration.

  • Close-ended funds

Here, you can invest only during the New Fund Offer (NFO) period. The units are automatically redeemed on the pre-determined maturity date. These funds are listed on stock exchanges.

MFs offer systematic investment plans (SIPs), which allow you to invest a small amount at periodic intervals in schemes of your choice. It helps you to save regularly and inculcates financial discipline. 

You can apply for MFs online via the Mahindra Finance website. Use the online SIP calculator to make your investment decision.

Nicholas Jansen