Most popular types of mutual funds:Hence mutual funds are available in various categories, it is an important thing that you should have a clear vision of type of the scheme in which you are going to invest. SEBI(The Securities and Exchange Board of India) is the regulator of mutual funds in India, classified mutual funds into to the following categories to help investors in choosing schemes that suits to their investment needs and risk. SEBI classified mutual fund on the basis of their sector, risk involved, time horizon, and objectives etc like
Solution Oriented Schemes
Here is the categories of mutual fund based on market capitalization. (i.e., small-cap, mid-cap or large-cap) indicates the size of the companies in which the fund invests, not the size of the mutual fund.
1. Large-cap mutual funds: Mutual Funds that invest their assets in equity companies classified under large market capitalization(well-established and have an excellent track record). Large cap funds are known to offer stable and sustainable returns over the long term, but might be outperformed by small and mid cap funds, which have higher risk exposure. Investors who want an option of safe investment the large cap funds are the best for them . The large cap firms can sustain the market fluctuations and make profit for their Investors in long term investment.
2. Mid-cap mutual funds: Mid-cap funds parks their money in companies which are categorized as mid cap by SEBI regulations. Mid cap companies are more volatile than large-cap companies but more stable than small-cap companies.
Mid-cap funds offer investors greater growth potential than large cap funds, but with less volatility and risk than small cap funds.
3. Small-cap funds: These funds invest major portion of their corpus into small-cap companies. Small cap companies can give high returns as they are yet to be discovered within the sector but risk is also high in making Investment in small cap companies. Think of a company’s SEBI ranking like competitive examination ranks; the higher the rank, the higher the risk. hence these schemes are best suited for investors who are willing to take high risk for better returns. This is an extremely risky investment so consult with an expert before choosing this type of schemes.
4. Multi-cap funds: Multi cap funds are make their Investment in large, mid and small cap companies as per their investment strategies. They are also called hybrid funds. This is one of the best technique of neutralizing the risk in mutual funds. An investor with the objective of wealth creation over the long-term investment with moderate risk this type of schemes is suitable for him/her. These schemes provide diversified approach to investing in the equity markets to small investors with good Returns. read about why portfolio diversification is a must.
Other schemes5. Tax savings Fund: If you are seeking for an Investment with tax benefits than you should think about it. These funds are offer a tax exemption limit of Rs 1.5 Lakhs under Sec 80C. With a lock-in period of three. these funds primarily invest in the equity market. This feature discourages you from making early redemptions & inculcates discipline in your investing. More popularly known as ELSS (Equity Linked Savings Scheme), The actual returns from these funds are Long Term Capital Growth, which are taxed at 10% and have an exemption limit of Rs. 1 Lakh. So ELSS can be best option for long term financial planning like retirement, child’s education or any other long-term goal along with saving tax can consider investing in this fund.
6. Dividend funds: Many of the companies give dividends (Distributed profit of a company among shareholders). The mutual funds which invest in companies that pay dividends are called dividend yield mutual funds. Investors who want regular income, even if comparatively low, but regular should consider these type of funds.
7. Open ended mutual fund: In this type of mutual funds, there is no fixed maturity period. Investors can buy and sell units at NAV that is declared on a daily basis the units are available for redemption as well as investment throughout the year, i.e. you can keep your investment for as long as you wish. If you seeking a mutual fund investment with liquidity benefits than, these mutual funds are great option for you.