The investments of these schemes will predominantly be in the stock markets and endeavor will be to provide investors the opportunity to benefit from the higher returns which stock markets can provide. However they are also exposed to the volatility and attendant risks of stock markets and hence should be chosen only by such investors who have high risk taking capacities and are willing to think long term. Equity Funds include diversified Equity Funds, Sectoral Funds and Index Funds. Diversified Equity Funds invest in various stocks across different sectors while sectoral funds which are specialized Equity Funds restrict their investments only to shares of a particular sector and hence, are riskier than Diversified Equity Funds. Index Funds invest passively only in the stocks of a particular index and the performance of such funds move with the movements of the index.

2 Debt Schemes

Debt Funds invest only in debt instruments such as Corporate Bonds, Government Securities and Money Market instruments either completely avoiding any investments in the stock markets as in Income Funds or Gilt Funds or having a small exposure to equities as in Monthly Income Plans or Children’s Plan. Hence they are safer than equity funds. At the same time the expected returns from debt funds would be lower. Such investments are advisable for the risk-averse investor and as a part of the investment portfolio for other investors.

3 Balanced Schemes

Balanced Fund invests in a mix of equity and debt investments. Hence they are less risky than equity funds, but at the same time provide commensurately lower returns. They provide a good investment opportunity to investors who do not wish to be completely exposed to equity markets, but is looking for higher returns than those provided by debt funds.

4 Exchange Traded Scheme

The investment objective of the fund is to seek to provide returns that closely correspond to returns provided by price of gold through investment in physical Gold. However the performance of the scheme may differ from that of the underlying asset due to tracking error.

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.