Types of Mutual Funds & It’s Sub-Categories

Types Of Mutual Funds: The main division of mutual funds is into open-ended and closed ended. They are two different types of mutual funds.

Open Ended Schemas: The open-ended scheme allows investors to buy and sell units at any time during the plan period. This open-ended scheme does not have an expiration date. You can redeem your investment whenever you need it. Some open-ended schemes have a lock in period, such as the ELSS scheme. You cannot redeem units during this lock-in. It includes subcategories such as Debt, Equity, Liquid and Equity in the open-ended mutual fund category.

  1. Debt fund: The majority of debt funds are invested into debentures and government securities. While debt funds may offer lower returns than equity, they can also offer lower risk and can make a fixed profit.
  2. Liquid Fond: The Liquid Fund is for people who only want to invest for a few months. This fund invests only in short-term debt instruments. Liquid funds are a safe investment option with lower charges.
  3. Equity Fond: This fund invests in the share market. Most people make investments in this category. This fund is better for long-term investments and more risky for short-term investments. There are many types of it, including the Index fund and Sectoral fund as well as the Midcap Small cap fund.
  4. Balanced fund: These schemes are great for investors who want to make more money with less risk. The fund invests in fixed income security and equity at a set ratio. Investing in equity leads to higher profits and investments in fixed income securities lead to safer development.

Closed Ended Schem: An investor cannot invest in the closed-ended scheme at the beginning of it when the NFO is issued. The maturity date of the closed-end plan is already set. The maturity date cannot be rescheduled so that one can exit the closed-ended plan. Closed-ended plans typically include two types of funds: Fixed Maturity Plan and Capital Protection Fund.

  1. Capital Protection: Investors invest in capital protected funds primarily to make a profit and keep their capital safe. The scheme invests mainly in fixed income securities. However, a small amount of it also invests in equity. Because it is a closed-ended scheme that invests capital for a set period of time, the manager is not able to take on more risk.
  2. Fixed maturity plan: The maturity date of a fixed maturity plan is set. Therefore, it invests in date instruments that mature over the stock’s life span. These stocks have lower charges as the manager must invest in fixed instruments.