Mutual Funds

Mutual funds are an ideal investment vehicle for regular investors who do not know much about investing. Investors can choose a mutual fund scheme based on their financial goal and start investing to achieve the goal.

A mutual fund collects money from investors and invests the money in equities, bonds and other securities, on their behalf. It charges a small fee for managing the money.

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Types of Mutual Funds in India

The Securities and Exchange Board of India has categorized mutual fund in India under four broad categories:

Equity mutual fund scheme

These schemes invest directly in stocks. These schemes can give superior returns but can be risky in the short-term as their fortunes depend on how the stock market performs. Investors should look for a longer investment horizon of at least five to 10 years to invest in these schemes. There are 10 different types of equity schemes.

Debt mutual fund schemes

These schemes invest in debt securities. Investors should opt for debt schemes to achieve their short-term goals that are below five years. These schemes are safer than equity schemes and provide modest returns. There are 16 sub-categories under the debt mutual fund category.

Hybrid mutual fund schemes

These schemes invest in a mix of equity and debt, and an investor must pick a scheme based on his risk appetite. Based on their allocation and investing style, hybrid schemes are categorised into six types.

Mutual fund investments are subject to market risks. Please read the scheme information and other related documents carefully before investing.

Pros

  • Liquidity
  • Diversification
  • Minimal investment requirements
  • Professional management
  • Variety of offerings

Cons

  • High fees, commissions, other expenses
  • Large cash presence in portfolios
  • No FDIC coverage
  • Difficulty in comparing funds
  • Lack of transparency in holdings