Types of Mutual funds in India based on investment goals, asset class, risk and more

Debt Funds

These types of mutual funds pool money in fixed-income securities like bonds and serve as an ideal mutual fund for investment for conservative investors.

Money Market Funds

These mutual funds invest in short-term, low-risk instruments like treasury bills. They are a safe place to park surplus cash, offering stability and liquidity.

Hybrid Funds

These types of mutual funds blend equity and debt in a single portfolio. They are an ideal mutual fund for investment for those looking for diversification and moderate risk.

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Types of Mutual Funds Based on Investment Goals

The types of mutual funds judging by one’s investment goals would be:

Growth Funds

They focus on long-term capital appreciation, investing in companies with high growth potential. While they offer substantial returns, they come with higher volatility.

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Income Funds

These mutual fund types prioritise providing a steady income stream through dividend-paying stocks, interest-bearing securities and so on.

Liquid Funds

These mutual funds offer safety, liquidity, and a slightly higher return than traditional savings accounts. They are an ideal mutual fund for investment for short-term cash management needs.

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Tax-Saving Funds (ELSS)

ELSS means to combine the potential for equity market growth with tax benefits under Section 80C of the Income Tax Act in India.

Aggressive Growth Funds

This mutual fund type invests in high-growth stocks. These are tailored for investors willing to endure market fluctuations in pursuit of potential high returns.

Capital Protection Funds

These mutual funds primarily invest in fixed-income instruments to protect investors' initial capital, serving as an ideal mutual fund for investment for conservative investors.

Fixed Maturity Funds

These types of mutual funds come with predefined maturity dates and provide predictability in returns.

Pension Funds

These types of mutual funds are designed for long-term retirement planning and balance growth and stability.

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Types of Mutual Funds Based on Investment Structure

The mutual fund types based on investment structure would be:

Open-Ended Funds

This mutual fund type allows investors to buy or sell shares anytime. They are an ideal mutual fund for investment for those who want to adjust their investments in response to market conditions or personal financial goals.

Closed-Ended Funds

These have a fixed number of shares and trade on secondary markets. They often come with a specified maturity date.

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Interval Funds

Interval funds blend features of open-ended and closed-ended funds, allowing investors to enjoy periodic liquidity while maintaining structure in their investments.

Types of Mutual Funds Based on Risk

Going by risk, here are the mutual fund types:

Very-Low-Risk Funds

These funds primarily invest in safe assets like government bonds and money market instruments.

Low-Risk Funds

These generate modest returns through a mix of fixed-income securities while preserving capital.

Medium-Risk Funds

This mutual fund type balances safety and growth by diversifying across asset classes.

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High-Risk Funds

High-risk funds focus on assets with higher volatility, such as growth stocks, emerging markets, and so on.

Specialised Mutual Funds

Aside from the many types of mutual funds mentioned above, some special mutual funds do not fit under any of the aforementioned categories.

Sector Funds

These mutual fund types are favoured by those who have strong convictions about specific industries or wish to diversify beyond broad market exposure.

Index Funds

Index funds aim to replicate the performance of a specific market index, such as the S&P 500. Those seeking a cost-effective way to gain exposure to the overall market prefer these mutual fund types.

Fund of Funds

This mutual fund type is an efficient way for investors to access multiple investment strategies and asset classes within a single fund.

Emerging Market Funds

This mutual fund type offers growth potential but can experience higher volatility due to economic and political factors in emerging markets.

International Funds

This mutual fund type appeals to investors who want to capitalise on international growth.

Global Funds

These can be the ideal mutual funds for those seeking a comprehensive solution to access diverse markets.

Real Estate Funds

This mutual fund type is attractive to those interested in real estate but want to avoid engaging in direct property ownership.

Commodity-Focused Funds

This mutual fund type provides exposure to commodities like precious metals, oil, or agricultural products, offering a hedge against inflation.

Market-Neutral Funds

This mutual fund minimises market risk and appeals to those interested in alternative investment strategies.

Inverse Funds

This mutual fund type is ideal for those who seek to profit from bearish market conditions.

Asset Allocation Funds

These mutual funds dynamically adjust their portfolio mix based on market conditions and the fund manager's strategy. They are appealing to investors who want an actively managed, diversified portfolio.

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Gift Funds

This mutual fund type allows individuals to make contributions to charities.

Exchange-Traded Funds

ETFs offer exposure to various asset classes, sectors, and strategies.