Mutual funds are a popular investment option for individuals looking to invest their money in the stock market. In simple terms, a mutual fund is a pool of money collected from multiple investors, which is then invested in stocks, bonds, or other securities by a professional fund manager. Mutual funds offer several advantages over direct stock market investments, such as diversification, professional management, and ease of investment.
Mutual funds offer investors exposure to a wide range of stocks, bonds, and other securities, which helps reduce the risk of investing in a single company or sector. By diversifying your investments, you can spread your risk and potentially earn higher returns.
Each mutual fund scheme must be classified into one of these categories based on its investment objective, investment strategy, and asset allocation pattern. The SEBI categorization framework has brought more clarity and transparency to mutual fund investing, making it easier for investors to understand the nature and risk profile of different mutual fund schemes.
Equity Funds invest at least 65% of their assets in equity and equity-related instruments. These funds are further classified as large-cap, mid-cap, small-cap, multi-cap, and sectoral/thematic funds.
Debt funds invest primarily in fixed-income securities such as bonds, debentures, and other debt instruments. They are further classified based on the duration of the underlying debt instruments, such as overnight funds, liquid funds, ultra-short duration funds, low duration funds, medium duration funds, and long duration funds.
Vivamus at ultricies tortor vel volutpat neque. In justo turpis, aliquam id suscipit velsuscipit eget nisl.Hybrid funds invest in both equity and debt instruments in a pre-defined proportion. These funds are further classified as aggressive hybrid funds, conservative hybrid funds, balanced hybrid funds, dynamic asset allocation funds, and multi-asset allocation funds.
Solution Oriented Funds invest for a specific financial goal or a financial planning objective, such as retirement, child education, or marriage. These funds are further classified as retirement funds and children’s funds.
Other Funds include Index Funds, Fund of Funds, and Exchange-Traded Funds (ETFs). Index Funds invest in securities that replicate the performance of a specific index, while Fund of Funds invest in other mutual fund schemes. ETFs are passive investment products that track the performance of a specific index or commodity.
An open-ended mutual fund is a type of mutual fund where the units can be bought or sold at any time, and there is no fixed maturity date for the fund. These funds are open for subscription and redemption throughout the year, and investors can buy or sell units at the prevailing Net Asset Value (NAV) of the fund.
A closed-end mutual fund is a type of mutual fund where the fund has a fixed number of units, which are issued through an initial public offering (IPO) at the time of the launch of the fund. After the IPO, the units are traded on the stock exchange like shares of a company.
An interval fund is a type of mutual fund that combines the features of open-end and closed-end funds. It is a closed-end fund that periodically offers to buy back shares from its investors at specific intervals, typically quarterly or semi-annually.
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Investment Type |
Description |
| SIP (Systematic Investment Plan) | In SIP, an investor invests a fixed amount of money at regular intervals, usually monthly, in a mutual fund scheme. SIP is a convenient way to invest in mutual funds, as it helps in averaging the cost of investment over a period of time and eliminates the need for timing the market. SIP is suitable for investors looking for long-term wealth creation through disciplined and regular investing. |
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SWP (Systematic Withdrawal Plan)
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In SWP, an investor withdraws a fixed amount of money at regular intervals, usually monthly, from a mutual fund scheme. SWP is suitable for investors looking for regular income from their mutual fund investments, such as retirees or those who need a regular income stream. |
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STP (Systematic Transfer Plan)
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In STP, an investor transfers a fixed amount of money at regular intervals, usually monthly, from one mutual fund scheme to another. STP is suitable for investors who want to invest in a more aggressive scheme initially and later switch to a less risky scheme as they near their financial goals. |
| Lumpsum Investment | In lumpsum investment, an investor invests a one-time lumpsum amount in a mutual fund scheme. Lumpsum investment is suitable for investors who have a large sum of money to invest and are confident about the future prospects of the mutual fund scheme. |
| Loads applicable on mutual funds | Fee % |
| Entry Load | Nil |
| Exit Load | Depends on category of the Scheme. For Equity Schemes0.5%-1% |
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