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11 Types of Mutual Funds in India

types of mutual funds

A first question when you decide to invest in the mutual fund is – How do I know which fund is right for me? Well, an answer to this question depends upon your investment objective, risk appetite, and investment horizon. There are multiple types of mutual funds catering to different needs of different investors. You should choose a fund suitable to your risk profile and objective. If you are confused in selecting right mutual funds you should consult a financial advisor before making an investment decision. Mutual funds are usually divided into two types (1) Growth (2) Dividend. However, based on investment method there are 11 Types of Mutual Funds in India.

11 Types of Mutual Funds in India

  1. Large Cap Funds

Large Cap Funds invests primarily in blue chip companies with large market capitalization. These types of mutual funds are suitable for low risk investors. Large Cap Mutual Funds generally gives returns in the range of 12-15%. Large Cap funds give better returns if market conditions are favorable.

  1. Mid-Small Cap Funds

Mid-Small Cap Funds invests in companies with medium or small market capitalization. These types of mutual funds are risky in nature. These funds invest in small and emerging with exceptionally high growth rate. Mid-Small Cap funds are for aggressive investors.

  1. Flexi Cap Funds

Flexi Cap Funds are also known as Multi Cap Funds. These types of funds invests in stocks across market capitalizations. i.e Large cap, Mid Cap and Small Cap. A scope of diversity is widen while investing in flexi cap funds.

Also Read – Dividend Mutual Funds Equity Scheme – Should You Invest?

  1. Diversified Funds

A diversified mutual funds invests in companies regardless of size and sector. A diversification across stock market help fund to maximize gains. These type of funds are for a moderate and conservative investor with a long term investment objective.

  1. Balance Funds

A Balance Fund tries to keep balance between equity and debt market. These types of funds enjoy presence of both the markets. The ratio of equity to debt depends on orientation of fund moderate, aggressive, or conservative. These types of mutual funds are largely suitable for investor with low risk appetite.

  1. Debt Fund

Debt fund as name suggest these types of funds invest their money in pure debt market and debt instruments. The expected returns from these funds are 7-9%. The debt funds are classified in liquid funds,ultra short-term debt funds, short-term debt funds, corporate bond funds, guilt funds to MIP’s respectively.

  1. Liquid Fund

Liquid funds invest in the instrument with maturity up to 91 days. These funds are least risky. Investors who want to invest lump sum amount should invest in these schemes and then go for an STP (Systematic Transfer Plan) in equity schemes to earn more interest. These funds can be easily redeemed any time. The return in this type of fund is low and not guaranteed. 

Read – Model Mutual Fund Portfolio for 2018

  1. Asset Allocation Funds

Asset allocation funds are balance fund with additional cash component. This means Asset Allocation Funds invest in three asset classes equity, debt and cash. Investor looking for asset allocation mix can invest in this fund. This fund gives benefit of diversification to the investors.

  1. Sector Fund

Sector fund or sectorial fund invests in stocks from specific sector. An example could be real estate sector, telecom sector, banking sector etc. Investor bullish on specific sector can invest in these types of funds. However, sector funds are risky in nature.   

  1. Thematic Funds

Thematic funds are theme based fund. These mutual funds invest in multiple companies from different sector on basis of common theme. The theme could be infrastructure, oil and gas, steel, metal, pharma etc. These types of fund are risky in nature.

  1. Tax Saving funds

The next fund in list is tax saving fund. These types of funds are also called as ELSS (Equity Linked Saving Scheme). Money invested in this funds are exempted under section 80C. However, these funds  come with a lockin period

I hope the information given above will help you in the selection of right mutual funds for investment.

Shitanshu Kapadia
Shitanshu Kapadia
Hi, I am Shitanshu founder of moneyexcel.com. I am engaged in blogging & Digital Marketing for 10 years. The purpose of this blog is to share my experience, knowledge and help people in managing money. Please note that the views expressed on this Blog are clarifications meant for reference and guidance of the readers to explore further on the topics. These should not be construed as investment , tax, financial advice or legal opinion. Please consult a qualified financial planner and do your own due diligence before making any investment decision.