Mutual funds have become an important medium for investing money. Nowadays, bank rates have gone down and they are nowhere matching with the inflation rate. Therefore, the investors’ minds are changing from keeping their money into bank accounts to investing in mutual funds. There are other investing options like investing in stocks etc., but a common investor is not informed and competent enough to understand the intricacies of stock market. This is where mutual funds come to the rescue. As we discussed in chapter 1, a mutual fund is a group of investors operating through a fund manager to purchase a diverse portfolio of stocks or bonds. Mutual funds are highly cost efficient and very easy to invest in.

There are following types of mutual fund products available in India:

Closed-end funds: A closed-end mutual fund has a set number of shares issued to the public through an initial public offering.

Open-end funds: Open end funds are operated by a mutual fund house which raises money from shareholders and invests in a group of assets

Large cap funds: Large cap funds are those mutual funds, which seek capital appreciation by investing primarily in stocks of large blue chip companies

Mid-cap funds: Mid cap funds are those mutual funds, which invest in small / medium sized companies. As there is no standard definition classifying companies

Equity funds: Equity mutual funds are also known as stock mutual funds. Equity mutual funds invest pooled amounts of money in the stocks of public companies.

Balanced funds: Balanced fund is also known as hybrid fund. It is a type of mutual fund that buys a combination of common stock, preferred stock, bonds, and shortterm bonds

Growth funds: Growth funds are those mutual funds that aim to achieve capital appreciation by investing in growth stocks.

No load funds: Mutual funds can be classified into two types – Load mutual funds and No-Load mutual funds.

Exchange traded funds: Exchange Traded Funds (ETFs) represent a basket of securities that is traded on an exchange, similar to a stock. Hence, unlike conventional mutual funds

Value funds: Value funds are those mutual funds that tend to focus on safety rather than growth, and often choose investments providing dividends as well as capital appreciation.

Money market funds: A money market fund is a mutual fund that invests solely in money market instruments. Money market instruments are forms of debt that mature in less than one year and are very liquid.

International mutual funds: International mutual funds are those funds that invest in non-domestic securities markets throughout the world.

Regional mutual funds: Regional mutual fund is a mutual fund that confines itself to investments in securities from a specified geographical area, usually, the fund’s local region.

Sector funds: Sector mutual funds are those mutual funds that restrict their investments to a particular segment or sector of the economy.

Index funds: An index fund is a mutual fund or exchange-traded fund) that aims to replicate the movements of an index of a specific financial market.

Fund of funds: A fund of funds (FoF) is an investment fund that holds a portfolio of other investment funds rather than investing directly in shares, bonds or other securities.