Mutual Fund is a pool of money, collected from investors, and is invested in securities according to certain investment objectives. In India, Mutual Funds are constituted as TRUST. The ownership of the fund is thus joint or mutual. Each unit-holder of a Mutual Fund is part owner (beneficial owner). He is neither a creditor nor debtor.
The money collected is invested by the fund manager in different types of securities/assets:
- Equity – domestic/international
- Bonds, Debenture, G-Sec
- Money Market
- Gold
- Real Estate
Mutual Funds give the market returns and not assured returns. It optimizes the knowledge, the experience of a fund manager, and manage the risk in a better way.
Type, Category & Classification of MF
I. On the basis of Investment Objective
- Equity Schemes (13 categories)
- Large Cap Fund
- Mid Cap Fund
- Small Cap Fund
- Multi Cap Fund
- Flexi Cap Fund
- Large & Mid Cap Fund
- Dividend Yield Fund
- Value Fund
- Contra Fund
- Sectoral/Thematic Fund
- Focused Fund
- International Fund
- ELSS
- Debt Schemes (16 categories)
- Low Duration Fund
- Ultra Short Duration Fund
- Liquid Fund
- Overnight Fund
- Short Duration Fund
- Medium Duration Fund
- Money Market Fund
- Medium to Long Duration Fund
- Long Duration Fund
- Corporate Bond Fund
- Dynamic Bond Fund
- Banking & PSU Fund
- Credit Risk Fund
- Floater Fund
- Gilt Fund
- Gilt Fund with 10-year Constant Duration
- Hybrid Schemes (7 categories)
- Balanced Hybrid Fund
- Aggressive Hybrid Fund
- Conservative Hybrid Fund
- Dynamic Asset Allocation or Balanced Advantage Fund
- Multi-Asset Allocation Fund
- Equity Savings Schemes
- Arbitrage Fund
- Solution-Oriented Schemes (2 categories)
- Children’s Fund
- Retirement Fund
- Other schemes (4 categories)
- Index Funds/ETFs
- Fund of Funds - FOF (Overseas or Domestic)
- Commodity - Gold Funds
- Real Estate Funds
II. On the basis of Flexibility
- Open-Ended
- Close-Ended
- Interval Funds
III. As per Market Capitalization
These MF schemes can further be categorized among market cap as:
- Large-Cap: Firms ranked between 1 and 100 by full market capitalization
- Mid-Cap: Firms ranked between 101 and 250 by full market capitalization
- Small-Cap: Firms ranked above 250 by full market capitalization
- Passive Fund Management
- Replicates the Benchmark Index
- Fund Management Expenses are Low
- Tracking error should be the selection criteria
- Example: Index Fund & ETF
- Active Fund Management
- Performance dependent on Fund Managers Research and Fund House Philosophy
- Slightly expensive in comparison to Passive Management
- Relative outperformance in Longer Time Horizon
- Value Investment Style & Growth Investment Style
Disclaimer: Investment in securities & mutual funds are subject to Market Risk
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