Mutual funds are available in different categories based on the assets they invest in, their investment objectives, risk levels and investment time horizons. Understanding these categories can help investors choose schemes that suit their financial goals.
Mutual funds can broadly be classified based on the type of securities they invest in and their investment strategy.
These funds primarily invest in shares and equity-related securities. They are generally suitable for investors seeking long-term capital growth.
Higher RiskThese funds primarily invest in fixed-income securities such as government securities, corporate bonds and money-market instruments.
Relatively Lower RiskHybrid funds invest in a combination of equity and debt or other asset classes to create a diversified portfolio.
Moderate to High RiskThese funds aim to track the performance of a specific market index by investing in securities that represent that index.
Market LinkedEquity Linked Savings Scheme (ELSS) funds invest primarily in equities and qualify for tax benefits under applicable income-tax provisions, subject to conditions.
Tax SavingThese funds invest in short-term money-market instruments and are generally designed for short-term investment requirements.
Short TermLiquid funds invest in short-term instruments and are commonly considered for managing short-term surplus money.
Short DurationThese funds focus on a particular sector, industry or investment theme and may have greater concentration risk.
High ConcentrationThese funds provide exposure to securities or markets outside India, subject to the scheme's investment mandate and applicable regulations.
Global ExposureApart from the assets they invest in, mutual funds can also be classified according to how investors can buy or redeem their units.
Investors can generally purchase or redeem units on an ongoing basis at applicable NAV-related prices, subject to scheme terms.
These schemes have a defined maturity period and operate according to their specified scheme structure.
These funds allow purchase or redemption during specified intervals as stated in the scheme documents.
A simplified overview of some common mutual fund categories.
| Fund Type | Primary Investment | Typical Objective | Risk Level* |
|---|---|---|---|
| Equity Funds | Equities / Shares | Long-term growth | Higher |
| Debt Funds | Bonds & Fixed Income | Income / Stability | Moderate |
| Hybrid Funds | Equity + Debt | Balanced Growth | Moderate |
| Index Funds | Market Index | Index Tracking | Market Linked |
| Liquid Funds | Short-term Instruments | Short-term Management | Relatively Lower |
