Different types of Mutual Funds in India

The investing purpose, structure, and nature of the schemes are all used to categorize mutual funds. Mutual funds are divided into seven categories based on their investing objectives: equities or growth funds, fixed income or debt funds, tax-saving funds, money market or liquid funds, balanced funds, gilt funds, and exchange-traded funds (ETFs).

Mutual funds are divided into two groups based on their structure: closed-ended and open-ended schemes. Mutual funds are divided into three categories based on their nature: equity, debt, and balanced. There is some overlap in the classification of some schemes, such as equity growth funds, which might fall under both investment aim and natural classification.

Types of mutual funds

The following are some of the several types of mutual funds:

• Growth or Equity Funds - These funds invest in equity shares with the goal of capital gains over the medium or long term. They are associated with high risks because they are tied to highly volatile financial markets, but they provide good profits over the long run. As a result, individuals with a high-risk appetite will find these plans to be an excellent investment alternative. Diversified, sector and index funds are the three types of growth funds.

• Debt funds - also referred to as fixed-income funds, invest in fixed income or debt assets such as debentures, corporate bonds, commercial papers, government securities, and a variety of money market instruments. Debt funds can be a good option for people looking for a consistent, risk-free income. Debt funds are divided into subcategories such as gilt funds, liquid funds, short-term plans, income funds, and MIPs. Balanced Funds - These funds invest in both debt and equity securities. With these products, investors may expect a steady stream of income as well as growth. They are a good investment for those who are willing to assume moderate risks over the medium or long term.

• Tax Saving Funds - Tax saving funds are available to everyone who wants to develop their money while also saving money on taxes. Tax saving funds, commonly known as equity-linked savings schemes, allow investors to take advantage of tax rebates under Section 80C of the Income Tax Act of 1961.

• ETFs (Exchange-Traded Funds) - An ETF is a stock exchange-traded fund that owns a basket of assets such as bonds, gold bars, oil futures, foreign currency, and so on. It allows you to buy and sell units on the stock markets at any time during the day. Open-ended schemes - An open-ended scheme is one in which units are continuously bought and sold, allowing investors to participate and depart at their leisure. The Net Asset Value (NAV) is used to buy and sell funds (NAV).

• Closed-ended schemes - These schemes have a set unit capital and can only sell a certain number of units. Investors cannot buy units in a closed-ended scheme after the New Fund Offer (NFO) has passed, meaning they cannot exit the scheme before the end of the term.

Expenses Associated with Mutual Fund Investing

The fund's worth is determined by its Net Asset Value (NAV), which is the portfolio's value minus expenditures. The AMC calculates this at the end of each working day.

An administration fee is charged by AMCs to fund their wages, brokerage, advertising, and other administrative costs. Typically, an expense ratio is used to determine this. The lower the expense ratio, the less expensive the Mutual Fund is to invest in.

AMCs may also impose loads, which are essentially sales charges in the form of distribution costs incurred by the company. If you are unfamiliar with related costs, you may find yourself in a situation where your investment gains are significantly decreased due to overhead fees. As a result, it's a smart practice to study the fine print for specifics on a Mutual Fund's expenses and fees.

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