Give yourself a pat on the back!
As you have decided to learn about “all the types of mutual fund in India” and you also want to invest it.
Did you know?
On 30 November 2022, The Total Assets Under Management of Indian Mutual fund Industry were at ₹ 40,37,561 crore. The AUM of the Indian MF Industry has increased fivefold in ten years, from 7.93 trillion on November 30, 2012, to 40.38 trillion on November 30, 2022. Now the question arises: whose money is this and How it will grow in wealth?
This money is distributed over all different types of mutual fund in India. Knowing about different types of mutual fund in India can help you a lot to understand more about this industry.
If you consider these types of mutual fund in India which I discussed in this blog, then you will have a lot more advantages over choosing a mutual fund as per goal and expectation.
Why knowing about types of Mutual Fund in India is important?
Investing in mutual fund is a major concern for the people of India. FDs and Gold are most favorite options of Investment as per our parents. Every person in this world has some expectation from its investment and we all want that return on investment should match our expectation. deciding about the type of mutual fund before investing can help you to know more about the mutual fund company or its related scheme.
Based on structure of mutual funds
The mutual funds have different properties, just like every individual out there has a different goal similarly every mutual fund has it own structure. The structure of the mutual fund defines the investment product in which the mutual fund company is going to invest.
Open Ended Mutual Fund
This is a very typical structure of mutual fund. In open-ended mutual funds, the units can be purchased and sold on a continual basis which allows the investors to invest as per their convenience. The number of outstanding units fluctuates whenever the fund house decides to repurchase or sell current units, which is why the unit capital of open-ended mutual funds changes.
These funds offer great liquidity as they allow the investors to redeem the units at any moment. There is no limit to the number of investors, shares or overall size of the fund until and unless the fund management wants to cease subscription, in order to manage it better.
Close Ended Mutual Fund
This sort of mutual fund has a maturity time of 5-7 years set in stone. They are accessible for subscription for a limited time during the scheme’s introduction. Mutual fund companies have a limitation on the total number of units which they are going to issue to the investors in the exchange of capital.
Furthermore, once the New Fund Offer (NFO) period closes, investors will be unable to purchase units in the closed-ended funds. This also means that no investor can enter or quit unless the tenure ends. The term “responsibility” refers to the act of determining whether or not a person is responsible for his or her own actions.
Based on asset class
- Equity: This fund purely invests in equity or shares of a specific company.
- Debt: This fund invests in Debt instruments like Bonds,
Since their invest in different asset class therefore they both will be treated under different types of mutual fund in India.
Based on Investment Goals
Every person in this world has some expectations from its investment and it is natural. Before investing in mutual fund, one needs to understand his/her investment goals. Following is mutual fund scheme based on Investment goals.
- Growth Funds: This fund invests a big chunk of money in shares and growing sectors of the country.
- Liquid Funds: Liquid funds, like income funds, are debt funds because they invest in debt instruments and money market funds with maturities of up to 91 days. The maximum money authorised to invest is Rs 10 lakh.
- Tax-Saving Funds: Liquid funds, like income funds, are debt funds because they invest in debt instruments and money market funds with maturities of up to 91 days. The maximum money authorised to invest is Rs 10 lakh.
- Fixed Maturity Funds: Many investors choose to invest at the end of the fiscal year to take advantage of triple indexation and so reduce their tax burden. If you are concerned about debt market trends and associated dangers, Fixed Maturity Plans (FMP) – which invest in bonds, securities, money market funds, and so on – give an excellent chance.
Based on risk:
Low Risk Mutual Fund
The minimal risk of liquid funds and ultra-short-term funds (one month to one year) is well established. Investors are hesitant to engage in riskier funds in the case of a rupee depreciation or an unexpected national crisis. In such instances, fund managers propose putting money in either one or a combination of liquid, ultra short-term or arbitrage funds. Returns could range from 6-8%, although investors are free to switch when valuations stabilize.
Medium Risk Mutual Fund
Here, the risk element is of medium degree as the fund management invests a portion in debt and the balance in equity funds. The NAV is not particularly volatile, and average returns could range from 9 to 12%.
High Risk Mutual Fund
High-Risk: High-risk mutual funds require active fund management and are appropriate for investors who have no risk aversion and are looking for large returns in the form of interest and dividends. Regular performance reviews are needed as they are sensitive to market volatility. You can expect 15% returns, while most high-risk funds often deliver up to 20% returns.
Most of the readers are going to choose low risk mutual fund. This could one of the most important metric while deciding among all types of mutual fund in India.
Conclusion
Knowing about What is equity mutual funds is really important for you as it differentiates mutual fund from stock market. You must have thought that how many types of mutual fund schemes are in India.
So, In India, there are 44 Asset Management Companies, and these 44 AMU are running almost 600+ different types of mutual fund schemes. Investors like you and me pool their money in these companies in exchange for some good return. AMFI look over these all companies and check whether they are operating in the favor of investors or not.
I hope you enjoyed this Guide on all the types of mutual funds in India
For the first time, I invested in Facebook with the help of a mutual funds and I am still continuing that SIP.
Where you have invested your money in mutual fund and what are types of mutual fund which you learned about the first time.
Let’s discuss over a coffee.
Till Then
Happy Learning! Happy Earning!
You can also read our Latest Post: How to Become Mutual Fund Manager? | A Practical Guide