Types of Mutual Funds Schemes

Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position, risk tolerance and return expectations etc. 

By Structure

• Open – Ended Schemes
• Closed – Ended Schemes
• Interval Schemes

By Investment Objective

• Growth Schemes
• Income Schemes
• Balanced Schemes
• Money Market Schemes

Other Schemes

• Tax Saving Schemes
• Special Schemes
• Index Schemes

· Sector Specific Schemes                            

                           

There are a variety of funds available across categories. There are funds which invest in growth stocks, funds which specializes in stocks of a particular sector, funds which assure returns to the investors, funds which assure returns to investors, funds which invest in debt instruments, and funds which invest aggressively in the stocks. Thus , we have income funds, balanced funds, liquid funds, gilt funds, index funds, Exchange Traded Funds, sectoral funds, and then there are open-ended and closed-ended funds and assured return funds-----there is a fund for every requirement.

MFs can be classified according to their maturity period. A closed – ended fund has a stipulated maturity, the investors have to wait until maturity for redemption. A open-ended fund gives investors an option to redeem and buy units at any time from the fund. These schemes do not have a fixed maturity and can be traded conveniently at NAV prices declared on a daily basis.

Value Advantage

Effective Regulation

Unlike the company fixed deposits, where there is little control with the investment being considered as unsecured debt from the legal point of view, the Mutual Fund industry is very well regulated. All investments have to be accounted for, decisions judiciously taken. SEBI acts as a true watchdog in this case and can impose penalties on the AMCs at fault. The regulations, designed to protect the investors’ interests are also implemented effectively.

Transparency

Being under a regulatory framework, mutual funds have to disclose their holdings, investment pattern and all the information that can be considered as material, before all investors. This means that the investment strategy, outlooks of the market and scheme related details are disclosed with reasonable frequency to ensure that transparency exists in the system. This is unlike any other investment option in India where the investor knows nothing as nothing is disclosed. 

Flexible and Affordable

Mutual Funds offer a relatively less expensive way to invest when compared to other avenues such as capital market operations. The fee in terms of brokerages, custodial fees and other management fees are substantially lower than other options and are directly linked to the performance of the scheme. Investment in mutual funds also offers a lot of flexibility with features such as regular investment plans, regular withdrawal plans and dividend reinvestment plans enabling systematic investment or withdrawal of funds. Even the investors, who could otherwise not enter stock markets with low investible funds, can benefit from a portfolio comprising of high-priced stocks because they are purchased from pooled funds.