7 popular types of Mutual Funds

Mutual funds can be categorised based on the asset they invest in and whether they have a maturity date

Mutual funds are among the most popular investment instruments. They are suited for visitors with all kinds of risk profiles, helping earn decent returns and build a wealth corpus. Mutual funds essentially acquire money for many individuals and invest them in assets such as stocks and bonds.

However, not every mutual fund invests in all the assets. Some are equity-focused, while others invest more in debt instruments. Additionally, mutual funds can be categorised based on whether investors can enter or exit when they need. Investors must decide which mutual fund they want to invest in once they have assessed their risk profile and financial requirement. Here are a few common types of mutual funds available in India.

Types of mutual funds

There are many types of mutual funds available for investors in India. The major ones include:

Open-ended funds

Open-ended funds allow you to invest and redeem your investment whenever you want. These funds do not have a maturity date, making them useful for investors who want the option of exiting when they need. These funds are managed by a fund manager, who selects where the clients will invest their money.

Closed-end funds

Closed-end funds are the opposite of open-ended funds. They are like fixed deposits (FDs), where you have a maturity date. These funds open for subscription during the offer period, following which you cannot invest in them. Closed-end funds also do not offer the option of instant exit, with investors locked in until the fund’s maturity.

Equity funds

Equity funds primarily invest in equity. These funds carry risk, but they also have the potential to earn high returns. As they are linked to the performance of stocks, equity funds are volatile.

Hybrid funds

Hybrid funds offer investors the benefit of investing in equity, debt, and other asset categories together. These mutual funds invest in a combination of many assets in varying proportions. It helps diversify investors’ portfolios, which reduces dependence for returns on a single asset.

Fixed income funds

Fixed income funds invest in government securities, debentures, and corporate bonds. These funds carry low risk, so they are better for investors with a low-risk appetite.

Tax saving funds

Equity Linked Savings Schemes (ELSS) are growing in popularity, and rightly so. They let you maximise your wealth and save taxes. ELSS funds invest primarily in a mix of equity and debt instruments. They are suitable for salaried investors looking to invest for a longer run.

Pension funds

Also known as retirement mutual funds, pension funds can help secure your retirement. These funds offer fixed returns, which are not dependent on market fluctuations.

You can begin investing in multiple funds through banking apps. IDFC FIRST Bank’s mobile application also offers this feature. You can choose from many types of mutual fund schemes and invest based on your risk appetite. You can also use IDFC FIRST Bank’s mutual fund investment calculator to calculate your approximate returns.

Simply enter the amount you want to invest each month and the number of years you wish to invest for. The calculator will use the information to tell you the total amount you will get at the end of the tenure.

Disclaimer

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