There are different categories of Mutual Funds which are managed by the Fund Managers of Asset Management Company (AMC) as stated below-
- Equity
- Large Cap Funds
- Mid Cap Funds
- Small Cap Funds
- Debt
- Overnight Funds
- Liquid Funds
- Ultra Short Duration
- Short Duration
- Corporate Bond Fund
- Credit Risk Fund
- Gilt Fund
- Dynamic Bond Fund
- Income Fund
- Hybrid
- Equity Linked Saving Scheme (ELSS)
Invest wisely as per your requirements and risk appetite. Market is always positive and feed return to the investors provided you have free funds for investment and patience.
Equity Funds
Equity Funds are those funds which invests the money of investors in the stocks of Indian company. Equity Funds are classified in Small, Mid and Large cap funds based on the size of companies in which fund manager invests the money. Big companies or Fortune 500 companies are called Large Cap whose Market capitalization is more than 50,000 Crores. Mid Cap company are those companies whose Market Capitalization is greater than 10,000 Crores but less than 50,000 Crores. Small Cap Companies are those companies whose Market Capitalization is less than 10,000 Crores.
Selection of companies by the fund manager decides the return in the fund. You might seen some funds had given good return and some not and it is due to the performance of companies in which fund manager invested the corpus. If you want to invest in equity funds then choose your funds wisely based on the companies in which corpus is invested, past performance, benchmark comparison, fund manager profile, etc.
If you want stable growth from equity fund then go with Large cap funds as these funds are less volatile in nature and hence chances of price drop is less. If you are Risk Lover then choose a portfolio of Mid cap and Large cap funds as these funds are capable to give you decent returns provided you give time to market to feed your investment.
Selection of companies by the fund manager decides the return in the fund. You might seen some funds had given good return and some not and it is due to the performance of companies in which fund manager invested the corpus. If you want to invest in equity funds then choose your funds wisely based on the companies in which corpus is invested, past performance, benchmark comparison, fund manager profile, etc.
If you want stable growth from equity fund then go with Large cap funds as these funds are less volatile in nature and hence chances of price drop is less. If you are Risk Lover then choose a portfolio of Mid cap and Large cap funds as these funds are capable to give you decent returns provided you give time to market to feed your investment.
Debt Funds
Debt funds are those funds in which fund manager invests the money in Government Bonds, Corporate Bonds, Debentures, ETF, Money Market, Treasury Bills, etc. These funds are much safer than Equity funds however returns are also less than Equity funds as these funds do not earn higher return but stable return. There are several type of Debt Funds available in the Market as per the need of the Investors. Based on time, below are some common debt funds.
- Overnight Funds : These funds invest in securities with an Investment horizon of One day. Minimal Fluctuations is expected in funds as these are assumed to be invested for one day.
- Liquid Funds : These funds provides a great liquidity with an Investment horizon of 1-3 months. There are some fluctuations expected.
- Ultra Short Duration : These funds provide a better return and an Investment horizon of 3-6 Months. Some Fluctuations are expected.
- Short Duration Funds : These funds offer investment opportunity for a short duration say 1-3 years. It invests the money in Debt Fund, Money Market, etc.
- Corporate Bond Funds : These funds have to invest their 80% of the corpus in Highest rated Corporate Bonds. A higher return is expected in these funds.
- Gilt Funds : These funds invest 80% of the corpus in Government Securities (G-Sec). Hence there is no credit risk involved in these funds.
- Long Duration Funds : These funds invest the corpus in long term securities comprising G-Secs, Bonds and Debentures.The investment horizon in these funds are expected to be 5-7 years.
Hybrid Funds
Hybrid funds are those funds in which fund manager invests the money in combination of Largecap, Midcap and Smallcap funds and hence these funds offer a great exposure across difference segments of Equity. These funds also uses exposure of investment in two or more class of assets. Past performance of Hybrid funds are really good as it gives decent return in 3 years and 5 years.
Equity Linked Saving Scheme (ELSS)
ELSS Funds invest majority of their corpus into equity and equity related instruments. These funds offer the taste of equity as it offers Return with Risk. Government promotes these funds as Tax Saving Option to Indian Citizen. One can invest in ELSS and takes the tax benefit under section 80C with the lowest lock-in period of 3 years. These funds have become choice of young investors who want Equity Exposure and at the same time, save the tax.There are other type of Mutual Funds also available but above mentioned category are the most common and majorly investment choice of Investors. Understand the terms, use freely available analytical tools to measure return over the period of time and invest in Direct Mutual funds to get higher return.
There are two type of investment option in Mutual Funds, Regular and Direct; Regular type of investment gives an advantage of continuous monitoring in the investment by the fund manager whereas Direct Type of Investment involves less monitoring of fund manager. Regular Investment involves a cost of monitoring by Fund Manager which will bring down the return % for the investors whereas Direct Mutual Funds offer a higher return %.
Invest wisely and do an in depth analysis of the mutual funds based on your risk appetite.
Happy Learning !!!
Comments
Can you suggest some ELSS and Mid-cap equity funds as an expert opinion to invest into.