Know What Are The Types Of Mutual Funds Available In India And Where They Invest - Part - 1

If you want to know completely about the Mutual fund industry in India, then this article is for you.

As this topic is very wide and has lots of information to know and learn, we have decided to divide this article in Parts and this is Part - 1.

In this article we going to explain about the types of mutual funds and there subcategories in detail (Only about Equity mutual Funds) so that one can get a compete information about Equity mutual Funds in a single article.

First of all if you want to know what is Mutual Fund and how it Operates then Click here..

Types of Mutual Funds

1. Equity Mutual Funds
2. Hybrid Mutual Funds
3. Debt Mutual Funds
4. Solution Oriented Funds
5. Fund of Funds
6. Index Funds / Exchange Trade Funds (ETF's)

Ok, now will understand each types of Mutual Funds in detail along with their sub-categories

Equity Mutual funds 

In this type of funds Asset management Company(AMCs) will invest primarily in Stocks listed on BSE/NSE. 

The sub-categories of this funds are as follows.

• Large Cap Fund (Bluechip): These mutual funds invest in Top 100 stocks (basis highest market capitalization) listed in the Indian stock markets. Larger stocks are expected to be less risky and have stable growth expectation.
  Over the past years these types of funds have given very good returns over the tenure of 8~10 years of investment (Recommended mode of investments - SIP )
   
• Mid Cap Fund: These mutual funds invest in stocks ranked from 101 to 250 (basis highest market capitalization). Larger stocks are expected to be less risky but smaller stocks may have higher potential to grow and create wealth over the long term investment prospective.
  Therefore, Mid-cap funds are riskier than large cap funds. So, Invest with a long term prospective minimum 10~12 years.
  
  
• Small Cap Fund: These mutual funds invest in stocks ranked 251 on wards. Smaller stocks are highly risky and also have a higher potential to grow. Therefore, small-caps are riskier than large & mid cap stocks.Invest with a long term prospective minimum 10~15 years.
  
  
• Multi cap Funds: These mutual funds have their investments in large cap, mid-cap and small cap stocks. this type of fund is made for people looking at taking a little bit of risk but not too high. Over the past years these types of funds have given very good returns over the tenure of 8~10 years.
  
  
• Large & Mid cap Funds: These funds have their investments spread across large cap and mid-cap stocks only. It is good for people looking to invest in both Large and mid cap companies.
  
  
• Value Funds: These mutual funds invest in stocks which are undervalued. The stocks may be under valued because of many factors that will be analysed by fund manager. And will have potential to provide higher returns compared to peers. These funds can be considered as risky as mid-cap funds, Invest with a long term prospective minimum 5~8 years.
  
  
• Contra Funds: These mutual funds invest in stocks and follow a strategy of purchasing and selling in contrast to the prevailing sentiment. The underlying assumption is that herd behavior among investors often makes the market very costly or very cheap at times. These can be considered as risky as value funds.
  
  
• Focused Funds: These mutual funds invest in stocks but restrict the number of stocks in the portfolio to a maximum of 30. Theme is similar to Multi cap funds, only capped at 30 stocks at maximum.
  
  
• Equity Linked Savings Scheme (ELSS): These mutual funds maintain portfolio largely in the stocks (equity). By Investing in these funds one can get Tax Benefit up to Rs 1,50,000 under Sec 80C can be claimed every year. to know more details about these funds Click here..
  
  
• Thematic / Sectoral Funds: These mutual funds invest in stocks selected from single sector or fits in specific theme, like Infrastructure, FMCG, BFSI, Pharma, Consumption theme etc. As they only invest in a particular sector or theme hence are extremely risky or one can say that these funds have highest risk factors than all other types of funds.

Details about Other Types of Mutual funds will be covered in up coming Parts..

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