#mutual fund types

[investmoneyhub]

Investment in sector funds should be made when the fund manager expects the related sectors, to do well. They could out-perform the market, if the call on sector performance plays out. In case it doesn’t, such funds could underperform the broad market.

An open end sector fund should invest at least 80% of the total assets in the equity and equity-related instruments of the identified sector. XYZ Banking Fund, ABC Magnum Sector Funds are examples of sector funds.

Based on Themes

Theme-based funds invest in multiple sectors and stocks that form part of a theme. For example, if the theme is infrastructure then companies in the infrastructure sector, construction, cement, banking and logistics will all form part of the theme and be eligible for inclusion in the portfolio. They have more diversification than sector funds but still have a high concentration risks.

An open-end thematic fund should invest at least 80% of the total assets in the equity and equity-related instruments of the identified sector. Under Thematic Category of mutual funds, any scheme under the ESG category can be launched with one of the following strategies –

a.Exclusion b.Integration c.Best-in-class & Positive Screening d.Impact investing e.Sustainable objectives f.Transition or transition related investments.

Based on Investment Style

The strategy adopted by the fund manager to create and manage the fund’s portfolio is a basis for categorizing funds. The investment style and strategy adopted can significantly impact the nature of risk and return in the portfolio. Passive fund invests only in the securities included in an index and does not feature selection risks. However, the returns from the fund will also be only in line with the market index.

On the other hand, active funds use selection and timing strategies to create portfolios that are expected to generate returns better than the market returns. The risk is higher too since the fund’s performance will be affected negatively if the selected stocks do not perform as expected.

The open-end equity funds (based on strategies and styles for selection of securities) are classified by SEBI as follows:

Value funds

Value Funds seek to identify companies that are trading at prices below their inherent value with the expectation of benefiting from an increase in price as the market recognizes the true value. Such funds have lower risk. They require a longer investment horizon for the strategy to play out. At least 65% of the total assets of the value fund should be invested in equity and equity-related instruments.

Contra fund

Contra Funds adopt a contrarian investment strategy. They seek to identify under-valued stocks and stocks that are under-performing due to transitory factors. The fund invests in such stocks at valuations that are seen as cheap relative to their long-term fundamental values. Mutual fund houses can either offer a contra fund or a value fund.

Dividend yield fund

Dividend yield funds invest in stocks that have a high dividend yield. These stocks pay a large portion of their profits as dividend and these appeals to investors looking for income from their equity investments. The companies typically have high level of stable earnings but do not have much potential for growth or expansion.

They therefore pay high dividends while the stock prices remain stable. The stocks are bought for their dividend pay-out rather than for the potential for capital appreciation. At least 65% of the total assets of the dividend yield fund should be invested in equity and equity-related instruments.

Focused fund

Focused funds hold a concentrated portfolio of securities. SEBI’s regulation limits the number of stocks in the portfolio to 30. The risk in such funds may be higher because the extent of diversification in the portfolio is lower.

Debt Funds

Debt funds invest in a portfolio of debt instruments such as government bonds, corporate bonds and money market securities. Debt instruments have a pre-defined coupon or income stream. Bonds issued by the government have no risk of default and thus pay the lowest coupon income relative to other bonds of same tenor. These bonds are also the most liquid in the debt markets.

Corporate Bonds

Corporate bonds carry a credit risk or risk of default and pay a higher coupon to compensate for this risk. Fund managers have to manage credit risk, i.e. the risk of default by the issuers of the debt instrument in paying the periodic interest or repayment of principal. The credit rating of the instrument is used to assess the credit risk and higher the credit rating, lower is the perceived risk of default. Government and corporate borrowers raise funds by issuing short and long-term securities depending upon their need for funds.

Debt instruments may also see a change in prices or values in response to changes in interest rates in the market. The degree of change depends upon features of the instrument such as its tenor and instruments with longer tenor exhibit a higher sensitivity to interest rate changes

Fund managers make choices on higher credit risk for higher coupon income and higher interest rate risk for higher capital gains depending upon the nature of the fund and their evaluation of the issuer and macro-economic factors.

Debt Fund

Debt funds can be categorized based on the type of securities they hold in the portfolio, in terms of tenor and credit risk.

Short Term Debt Funds aim to provide superior liquidity and safety of the principal amount in the investments. It does this by keeping interest rate and credit risk low by investing in very liquid, short maturity fixed income securities of highest credit quality. The objective is to generate a steady return, mostly coming from accrual of interest income, with minimal NAV volatility.

The open-end debt schemes (investing in securities with maturity ranging from one day to one year) are classified by SEBI as follows:

Overnight Funds invest in securities with a maturity of one day.

Liquid Funds invest in debt securities with less than 91 days to maturity.

Ultra Short Duration Funds invest in debt and money market instruments such that the Macaulay duration of the portfolio is between 3 months and 6 months.

Low Duration Fund invest in debt and money markets instruments such that the Macaulay duration of the fund is between 6 months to 12 months.

Money Market Fund invest in money market instruments having maturity up to one year.

The next category of debt funds combines short term debt securities with a small allocation to longer term debt securities. Short term plans earn interest from short term securities and interest and capital gains from long term securities. Fund managers take a call on the exposure to long term securities based on their view for interest rate movements. If interest rates are expected to go down, these funds increase their exposure to long term securities to benefit from the resultant increase in prices. The volatility in returns will depend upon the extent of long-term debt securities in the portfolio.

Short term funds may provide a higher level of return than liquid funds and ultra-short term funds, but will be exposed to higher mark to market risks.

Open-end debt schemes investing in the above stated manner are categorised by SEBI in the following manner:

Short duration funds invest in debt and money market instruments such that the Macaulay duration of the fund is between 1 year – 3 years.

Medium duration fund invests in debt and money market instruments such that the Macaulay duration of the fund is between 3 years- 4 years.

Medium to Long duration fund invests in debt and money market instruments such that the Macaulay duration of the fund is between 4 years- 7 years. If the fund manager has a view on interest rates in the event of anticipated adverse situations then the portfolio’s Macaulay duration may be reduced to one year for Medium and Medium to Long duration funds.

Corporate bond fund

Corporate bond fund invests at least 80% of total assets in corporate debt instruments with rating of AA+ and above. Credit Risk Funds invest a minimum of 65% of total assets in corporate debt instruments rated AA and below. Banking and PSU fund invests a minimum of 80% of total assets in debt instruments of banks, Public Financial Institutions and Public Sector Undertakings and municipal bonds.

Open-end gilt funds invest at least 80% of the total assets in government securities across maturities. There is no risk of default and liquidity is considerably higher in case of government securities. However, prices of government securities are very sensitive to interest rate changes.

Long term gilt funds have a longer maturity and therefore, higher interest rate risk as compared to short term gilt funds.

Gilt funds are popular with investors mandated to invest in G-secs such as provident funds or PF trusts. Gilt fund with 10 year constant duration invest a minimum of 80% of total assets in government securities such that the Macaulay duration of the portfolio is equal to 10 years.

Dynamic bond funds seek flexible and dynamic management of interest rate risk and credit risk. That is, these funds have no restrictions with respect to security types or maturity profiles that they invest in. Dynamic or flexible debt funds do not focus on long or short term segment of the yield curve, but move across the yield curve depending on where they see the opportunity for exploiting changes in yields duration of these portfolios are not fixed, but are dynamically managed. If the manager believes that interest rates could move up, the duration of the portfolio is reduced and vice versa.

Fixed maturity plans (FMPs) are closed-end funds that invest in debt securities with maturities that match the term of the scheme. The debt securities are redeemed on maturity and paid to investors. FMPs are issued for various maturity periods ranging from 3 months to 5 years.

Hybrid Funds

Hybrid funds invest in a combination of debt and equity securities. The allocation to each of these asset classes will depend upon the investment objective of the scheme. The risk and return in the scheme will depend upon the allocation to equity and debt and how they are managed. A higher allocation to equity instruments will increase the risk and the expected returns from the portfolio. Similarly, if the debt instruments held are short term in nature for generating income, then the extent of risk is lower than if the portfolio holds long-term debt instruments that show greater volatility in prices. SEBI has classified open-end hybrid funds as follows:

Conservative hybrid fund

Conservative hybrid funds invest minimum of 75% to 90% in a debt portfolio and 10% to 25% of total assets in equity and equity-related instruments. The debt component is conservatively managed with the focus on generating regular income, which is generally paid out in the form of periodic dividend. The credit risk and interest rate risk are taken care of by investing into liquid, high credit rated and short term debt securities.

The allocation to equity is kept low and primarily in large cap stocks, to enable a small increase in return, without the high risk of fluctuation in NAV. These attributes largely contribute accrual income in order to provide regular dividends.

Debt oriented hybrid fund

Debt-oriented hybrid fund are designed to be a low risk product for an investor. These products are suitable for traditional debt investors, who are looking for an opportunity to participate in equity markets on a conservative basis with limited equity exposure. These funds are taxed as debt funds.

Balanced hybrid fund

Balanced Hybrid Fund invests 40% to 60% of the total assets in debt instruments and 40% to 60% in equity and equity related investments.

Aggressive hybrid fund

Aggressive Hybrid Funds are predominantly equity-oriented funds investing between 65% and 80% in the equity market, and invest between 20% up to 35% in debt, so that some income is also generated and there is stability to the returns from the fund.

Mutual funds are permitted to offer either an Aggressive Hybrid fund or Balanced Hybrid fund.

Dynamic Asset Allocation or Balanced Advantage fund dynamically manage investment in equity and debt instruments

Multi Asset Allocation Funds invest in at least three asset classes with a minimum of 10% of the total assets invested in each of the asset classes. The fund manager takes a view on which type of investment is expected to do well and will tilt the allocation towards either asset class. Within this, foreign securities will not be treated as separate asset class.

Arbitrage fund

Arbitrage funds aim at taking advantage of the price differential between the cash and the derivatives markets. Arbitrage is defined as simultaneous purchase and sale of an asset to take advantage of difference in prices in different markets. The difference between the future and the spot price of the same underlying is an interest element, representing the interest on the amount invested in spot, which can be realized on a future date, when the future is sold. Funds buy in the spot market and sell in the derivatives market, to earn the interest rate differential.

For example, funds may buy equity shares in the cash market at Rs. 80 and simultaneously sell in the futures market at Rs.100, to make a gain of Rs. 20. If the interest rate differential is higher than the cost of borrowing there is a profit to be made.

Thanks for reading. This blog is big but it’s really vast topic.

[kouhai-deactivated]

I created a GFM for a dental emergency. 🦷🚨

I have a bit of a predicament, guys. Spanning the past two years — and I cannot take it anymore.

I never ask for help like this, but this is getting more serious than I can handle anymore on my own. If you have the time to check this out, **even if all you can do is share this post to get it around on Tumblr, I'd appreciate that. Please and thank you!

[abiiii-ineffable]

And the second award of rhe night which is special dedication (prize for #1 person of the year)

*drum roll*

*still drum rolling*

*more drum roll*

*jesus christ this is a lo-

@nastasya--filippovna

Because she deserves everything. She is amazing and I'm so thankful for her.

Not a great gif but gets the msg across with me not having to do as much shitty typing 🤣

[sweeterthankarma]

iso: mutual aid request

hi friends. long time no post, I've been hanging mainly on twitter lately. I hate to return with bad news-- but, in the meantime, I at least I dropped off a 14k fic bangtan last week!

https://archiveofourown.org/works/57304558

I hope you all enjoy this vmin, and stay tuned for some jihope coming soon! (I know, I know, I never thought I'd write Jimin with anyone except Taehyung either.)

basically, I am struggling financially and in pretty much every other way possible personally, and I could really benefit from any and all help. I'm not in a position to openly disclose details due to safety reasons, but let's just say my life is falling apart in nearly every aspect. ha ha :D

below is my ko-fi. even a few dollars makes a difference. I've also linked my fic commissions form, all prices are negotiable! just ask and I'd love to help write what you want to read.

https://docs.google.com/forms/d/e/1FAIpQLSf6Oqfpl5T6dYcLn8s7hLgTndJtOhDtSjHJUkNMW75ZhIE05w/viewform?usp=send_form

tldr: mutual aid needed, please consider helping this queer woman with even the smallest of donations-- and get to read a fic of your preference in return!

[aarontveit]

tbh. coming online everyday to ask for assistance with something new that has cropped up cause i cannot afford to live/survive cause disabled people in canada aren't a priority and they are shitting all over the canada disability benefit & keeping us way below in legislated poverty cause giving us the disability emergency relief benefit would cost too much is just..... it's a lot. it's a lot from myself to sit with.

we can't trust crisis lines, cause they record the calls, they will call the police ans/or they will also suggest MAiD to individuals who are suffering 🙃 we are isolated

idk what my rant has to do with any of this and i am sorry, i am just so tired.

i only need $17 or $18 to get out of the negative. if you're able to help, thank you very kindly. it's okay if you can't, i appreciate th thought am, especially reading this).

thanks for any and all help.

edit: forgot to add my paypal

MY PAYPAL: DONATE HERE.

[wikkerwisp]

Hi, I hope you are doing well🌹

Can you help by sharing my story, reblog, and donating if you can, to keep hope alive for me, I'm type 1 diabetes. I am calling on your humanity and kindness to help me raise $340.

This amount will enable the approval of an insulin pump that will help me better control my diabetes. Although I am happy that I have been approved the hardest part is the money to pay for the pump and equipment, please your contribution is important. Be blessed ♥️

Of course I can.

I do not have that much reach ;

However I will more than happily share this ; as well as the Donation link on your blog.

I hope deftly that word does get around, and I will queue it , for later as well.

Type 1 Diabetes is (for undisclosed personal reasons)— something I deftly understand the ins and outs of.

Godspeed ; Get this person their $340.00 so they can get on with living their life instead of suffering with health complications.

(Medical insurance not caring about your literal life expectancy, due to how disabling Diabetes is— it's a shitshow nightmare, I know. Godspeed @myavenuesheep . 💌☕️💫)

[bellwether21]

4 Mutual Fund Types Explained: Which One Is Right for You

Mutual funds are one of the most accessible and flexible investment vehicles available today. But with so many categories, where do you begin? In this guide, we break down the 4 types of mutual funds to help you decide which one aligns best with your financial goals.

Whether you’re investing for long-term growth, regular income, or short-term needs, understanding the 4 types of mutual funds will give you the clarity to take confident steps toward your future.

1. Equity Mutual Funds: High Risk, High Reward

Equity funds invest in shares of publicly listed companies. They aim for capital appreciation over the long term and are ideal for investors with a high-risk tolerance and a long investment horizon.

Why Choose Equity Funds? They historically deliver higher returns than any other among the 4 types of mutual funds, especially over a 5–10 year period. Perfect for wealth builders and aggressive investors.

2. Debt Mutual Funds: Safe & Steady Returns

Debt funds invest in fixed-income instruments like government securities, corporate bonds, and treasury bills. They are less risky than equity funds and suitable for conservative investors.

Who Should Invest? If you prioritize capital safety and consistent income, debt funds can be your go-to mutual fund investment option. They also offer better returns than traditional savings accounts or fixed deposits.

 3. Hybrid Mutual Funds: A Balanced Strategy

Hybrid funds mix equity and debt in varying proportions. Some are more equity-heavy (aggressive), while others favor debt (conservative). This fund type helps you spread your risk while aiming for steady growth.

Best For: Investors who want exposure to equity without full volatility. It’s a great starting point if you’re working with a mutual fund distributor in Gurgaon for the first time and unsure about your risk profile.

4. Money Market Mutual Funds: Low-Risk, Short-Term Option

Money market funds invest in short-term instruments like commercial papers and certificates of deposit. These funds are highly liquid and carry minimal risk.

When to Use These? For parking surplus cash temporarily or building an emergency fund. Among the 4 types of mutual funds, this is the most secure and short-term focused.

How to Decide Which Fund Type Fits You?

Ask yourself:

Do I want capital growth or steady income?

Am I comfortable with market ups and downs?

How soon do I need the money?

Partnering with a trusted Wealth Management Company in India can help you answer these questions with expert guidance tailored to your unique situation.

 BellWether Helps You Invest the Smart Way

Navigating the 4 types of mutual funds can be confusing—but it doesn’t have to be. At BellWether, we simplify your investment journey by recommending funds that match your risk appetite, goals, and timeline. As a reliable mutual fund distributor in Gurgaon, we guide investors across India in building wealth, the smart way.

What are the 4 types of mutual funds? The 4 types of mutual funds are:

Equity Funds – Invest in stocks; high growth potential

Debt Funds – Invest in bonds; stable returns

Hybrid Funds – Combine equity and debt

Money Market Funds – Short-term, low-risk investments

 FAQs

1. Can I invest in more than one type of mutual fund at a time? Yes, diversification is actually encouraged. Investing in more than one of the 4 types of mutual funds helps balance risk and improves your portfolio's stability.

2. Are mutual funds taxable in India? Yes, returns from mutual funds are subject to capital gains tax. Equity and debt funds have different tax rules depending on the holding period.

3. How much should I start investing in mutual funds? You can begin with as little as ₹500/month through SIPs. It's best to consult a mutual fund distributor in Gurgaon to determine the right amount based on your goals.

4. Are mutual funds safer than stocks? Yes, mutual funds are diversified, which reduces the risk compared to investing in individual stocks. Debt and hybrid funds especially offer more safety.

5. How do I track the performance of my mutual fund investment? You can monitor fund NAVs via mobile apps, AMC websites, or by partnering with a Wealth Management Company in India like BellWether for regular performance reports.

[curiousquill1]

Learn how top wealth managers pick the best mutual funds. Simple, smart tips revealed to help you invest wisely and grow your money faster.

[investmoneyhub]

https://investmoneyhub.com/the-ultimate-guide-to-mutual-fund-investment-everything-you-need-to-know/

Mutual funds are investment products available to investors through which they can invest in an asset class of their choice such as equity, debt, gold or real estate. Investors who may not want to invest directly in financial markets may instead get exposure to the same securities through a mutual fund.Similarly, investors can diversify their portfolio holdings even with small amounts, by investing in gold and real estate through mutual funds. There are multiple entities involved in the activities of a mutual fund business. All these entities are regulated by SEBI for their eligibility in terms of experience and financial soundness, range of responsibilities and accountability.

How mutual funds operate?

The mutual fund appoints trustees to take care of various rights of investor when launching various schemes. Mutual fund appoints an asset management company (AMC) to manage the activities related to launching a scheme, marketing it, collecting funds, investing the funds according to the scheme’s investment objectives and enabling investor transactions.

New Fund offer (NFO)

The mutual fund invites subscription from investors by issuing an offer document that gives all details of the proposed fund, including its investment objective, investment pattern in different asset classes to reflect the objective, the strategy of the fund manager to manage the fund, the costs and fees associated with managing the fund and all other information prescribed by SEBI as essential for an investor to make an investment decision. This is the New Fund Offer (NFO) of the scheme.

The investor will assess the suitability of the fund for their investment needs and make an investment decision. The application form along with the abridged offer document called the Key Information Memorandum (KIM) is available with the AMC, investor service centres and other distribution points, the details of which are available in the KIM. The activities related to maintaining investor records and investment details and communicating with the investors is done by the R&T agent of the scheme.

Investment objective

An investor should decide to invest in a mutual fund scheme after following the suitability of the scheme to their needs. A investment objective defines the scheme of mutual fund. The investment objective states what the scheme intends to achieve. The asset class that the fund will invest in, the type of securities that will be selected and the way the fund will be managed will depend upon the investment objective.

What are the units of mutual fund?

Just as the number of shares of company represents the investors’ investment, or number of bonds or debentures represent investments in debt, units represent each investor’s investments in that mutual fund derived from the amount invested. Each unit represents one share of the fund. For example, A & B invests in SBI Equity fund when the price of each unit is Rs.10. A invests Rs.5,000 and B Rs.10,000. The number of units allotted is calculated as amount invested/price per units. A : Rs.5,000/Rs.10 = 500 units B : Rs.10,000/Rs.10= 1000 units. Through a new fund offer (NFO) investor gets offer of units. Subsequently, depending upon the structure of the scheme, the fund may or may not issue fresh units to investors.

Net assets

The assets of a mutual fund scheme are the current value of the portfolio of securities held by it. There may be some current assets such as cash and receivables. Together they form the total assets of the scheme. From this, the fees and expenses related to managing the fund such as fund manager’s fees, charges paid to constituents, regulatory expenses on advertisements and such are deducted to arrive at the net assets of the scheme.

Net assets of the scheme will go down if investors take out their investments from the scheme by redeeming their units or if the securities held in the portfolio fall in value or when expenses related to the scheme are accounted for. The net assets of the scheme are therefore not a fixed value but keep changing with a change in any of the above factors.

Net asset value (NAV)

The net asset per unit of a scheme is Net assets/Number of outstanding units of the scheme. This is the Net asset value (NAV). The NAV of the scheme will change with every change in the Net Assets of the scheme.

A redemption or additional investment will not directly affect the NAV since the transactions are conducted at the NAV.The time when a request for a purchase or redemption or switch of units is received by a mutual fund will determine when it is processed. This is a standard that is followed across all mutual funds so that there is equity and fairness in allocation and that no investors gets a preferential treatment over others. The NAV that will be applicable would thus be determined by the time when the request is received by the mutual fund.

The current value of the portfolio forms the base of the net assets of the scheme and therefore the NAV. It means that if the portfolio was to be liquidated, then this would be the value that would be realised and distributed to the investors. Therefore, the portfolio has to reflect the current market price of the securities held. This process of valuing the portfolio on a daily basis at current value is called marking to market.

Open- ended and Closed-end Schemes

Mutual fund schemes can be structured as open-ended or closed-end schemes. An open-ended scheme allows investors to invest in additional units and redeem investment continuously at current NAV. The scheme is for perpetuity unless the investors decide to wind up the scheme. The unit capital of the scheme is not fixed but changes with every investment or redemption made by investors.

A closed-end scheme is for a fixed period or tenor. It offers units to investors only during the new fund offer (NFO).The scheme is closed for transactions with investors after this. The units allotted are redeemed by the fund at the prevalent NAV when the term is over and the fund ceases to exist after this. In the interim, if investors want to exit their investment they can do so by selling the units to other investors on a stock exchange where they are mandatorily listed. The unit capital of a closed end fund does not change over the life of the scheme since transactions between investors on the stock exchange does not affect the fund.

Interval fund

It is a variant of closed end funds which become open-ended during specified periods. During these periods investors can purchase and redeem units like in an open-ended fund. The specified transaction periods are for a minimum period of two days and there must be a minimum gap of 15 days between two transaction periods. Like closed-ended funds, these funds have to be listed on a stock exchange

Exchange Traded Funds(ETF)

These are mutual funds that have the features of a mutual fund but can be traded. Like a stock they are listed on the stock exchange so they can be traded all day long. Beneath this feature is the fact that the ETF is a mutual fund that has its value derived from the value of the holdings in its portfolio. ETFs usually track some index when it comes to equity oriented funds while they can also track the price of a commodity like gold.Instead of a single NAV for a day that the investor gets in a normal open ended fund there are multiple prices they can get in an ETF. In an ETF it is actually investors trading with each other while in case of an open ended fund it is the investor on one side of the transaction and the mutual fund on the other side.

Regulator

The Securities and Exchange Board of India (SEBI) is the primary regulator of mutual funds in India. SEBI’s Regulations called the SEBI (Mutual Funds) Regulations, 1996, along with amendments made from time to time, govern the setting up a mutual fund and its structure, launching a scheme, creating and managing the portfolio, investor protection, investor services and roles and responsibilities of the constituents. Apart from SEBI, other regulators such as the RBI are also involved for specific areas which involve foreign exchange transactions such as investments in international markets and investments by foreign nationals and the role of the banking system in the mutual funds industry in India.

Association of Mutual Funds in India (AMFI) is the industry body that oversees the functioning of the industry and recommends best practices to be followed by the industry members. SEBI has defined the process of categorizing open-end mutual fund products broadly as equity schemes, debt schemes, hybrid schemes, solution oriented schemes and other schemes.

Open-ended schemes are classified based on the asset class/sub-asset class, the strategy adopted to select and manage the schemes or the solutions offered by the scheme. Only one scheme per category is permitted for each mutual fund. The exceptions are Index funds and Exchange Traded Funds (ETF) tracking different indices, Fund of Funds with different underlying schemes and sectoral/thematic funds investing in different sectors or themes.

Equity Funds

Equity funds invest in a portfolio of equity shares and equity related instruments. Since the portfolio comprises of the equity instruments, the risk and return from the scheme will be similar to directly investing in equity markets. Equity funds can be further categorized on the basis of the strategy adopted by the fund managers to manage the fund.

a) Passive & Active Funds

Passive funds invest the money in the companies represented in an index such as Nifty or Sensex in the same proportion as the company’s representation in the index. There is no selection of securities or investment decisions taken by the fund manager as to when to invest or how much to invest in each security. Active funds select stocks for the portfolio based on a strategy that is intended to generate higher return than the index. Active funds can be further categorized based on the way the securities for the portfolio are selected.

b) Diversified Equity funds

Diversified equity funds invest across segments, sectors and sizes of companies. Since the portfolio takes exposure to different stocks across sectors and market segments, there is a lower risk in such funds of poor performance of few stocks or sectors. Some equity diversified funds can also be closed ended schemes which are in operation for a specific time period. The assets are redeemed after the time period of the scheme is over and returned to the investors.

c) Based on market capitalisation

Equity funds may focus on a particular size of companies to benefit from the features of such companies. Equity stocks may be segmented based on market capitalization as large- cap, mid-cap and small-cap stocks. The open-end equity schemes (based on market capitalisation) are classified by SEBI as follows:

Large cap

Large cap funds invest in stocks of large, liquid blue-chip companies with stable performance and returns. Large-cap companies are those ranked 1 to 100th in terms of full market capitalization in the list of stocks prepared by AMFI. To be classified as a large cap fund, at least 80% of the total assets should be invested in such large cap companies.

Mid cap

Mid-cap funds invest in mid-cap companies that have the potential for faster growth and higher returns. These companies are more susceptible to economic downturns and therefore, evaluating and selecting the right companies becomes important. Funds that invest in such companies have a higher risk of the companies selected not being able to withstand the slowdown in revenues and profits.

Similarly, the price of the stocks also fall more when markets fall. Mid-cap companies are those ranked 101st to 250th in terms of full market capitalization in the list of stocks prepared by AMFI. To classify as a mid-cap fund, at least 65% of the total assets should be invested in such companies. Large and Mid-cap funds invest in equity-related securities of a combination of large and mid-cap companies. To be classified as a large and mid-cap fund, a minimum of 35% of the total assets should be invested in large cap companies and a minimum of 35% in mid-cap companies.

Small cap

Small-cap funds invest in companies with small market capitalisation with intent of benefitting from the higher gains in the price of stocks. The risks are also higher. Companies ranked from 251 onwards in terms of total market capitalization in the list of stocks prepared by AMFI are defined as small-cap companies. To be classified as a small cap fund, at least 65% of the total assets should be invested in such companies.

Multi cap

Multi cap funds invest across large, mid and small cap companies. Earlier to be classified as a multi cap fund at least 65% of the total assets should be invested in equity related instruments of such companies. At least 75% of the assets to be invested in equity related instruments with a minimum of 25 % in large caps, 25% in mid-caps and 25% in small caps. In Flexicap funds there is no minimum investment limits across market caps and the funds are free to invest according to their requirements. Overall at least 65% of the corpus has to be invested in equities.

d) Based on Sectors and Industries

Sector funds invest in companies that belong to a particular sector such as technology or banking. The risk is higher because of lesser diversification since such funds are concentrated in a particular sector. Sector performances tend to be cyclical and the return from investing in a sector is never the same across time. For example, Auto sector, does well, when the economy is doing well and more cars, trucks and bikes are bought. It does not do well, when demand goes down.

Banking sector does well, when interest rates are low in the market; they don’t do well when rates are high. Investments in sector funds have to be timed well.

Thanks for reading.

[creativemedianews]

Ultimate Guide to Investing for Beginners: Strategies, Tips, and Types of Investments

Ultimate Guide to Investing for Beginners: Strategies, Tips, and Types of Investments #AssetAllocation #bonds

[sanjhipoonji]

Infrastructure Mutual Funds invest in companies that provide important public services such as transportation, energy, and utilities. These funds provide long-term development potential and consistent returns through infrastructure investments. If you want to know the answers to all of these questions, call us at 7838077767 and start building a financially free future.

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Choosing the Right Type of SIP: A Guide for Investors

Investing in mutual funds through a Systematic Investment Plan (SIP) is one of the most effective ways to build wealth over time. However, with various types of SIPs available, choosing the right one can be a bit overwhelming. In this guide, we'll break down the different types of SIPs and help you understand how to choose the one that best suits your financial goals. We'll also explore how tools like the SIP return calculator can aid in making informed decisions and why mutual funds are a preferred option for mutual fund investment in India. What is a SIP? A Systematic Investment Plan (SIP) is a method of investing in mutual funds, where a fixed amount is automatically deducted from your bank account at regular intervals (monthly, quarterly, etc.) and invested in a chosen mutual fund scheme. SIPs are popular because they promote disciplined investing, reduce the impact of market volatility, and allow investors to benefit from rupee cost averaging. Types of SIPs Regular SIP A Regular SIP is the most common type, where you invest a fixed amount at regular intervals, typically monthly. This type of SIP is ideal for investors who want to build a habit of regular investing without worrying about market conditions. It is a simple and straightforward approach to mutual fund investment in India, suitable for both beginners and experienced investors. Flexible SIP A Flexible SIP allows investors to change the investment amount based on their financial situation. For instance, you can increase the SIP amount when you have surplus funds or reduce it during financial constraints. This flexibility makes it an attractive option for those who have irregular income or want the ability to adjust their investments as per their cash flow. Top-up SIP Top-up SIPs are designed for investors who wish to increase their investment amount periodically. For example, you can opt to increase your SIP amount by a certain percentage every year. This helps in accelerating wealth creation, especially if your income is expected to grow over time. A SIP return calculator can be particularly useful in estimating the potential returns from a Top-up SIP, taking into account the incremental investments. Perpetual SIP A Perpetual SIP continues indefinitely until you instruct the mutual fund company to stop it. Unlike regular SIPs, which are typically set for a specific tenure (e.g., 1 year, 3 years), Perpetual SIPs do not have an end date. This is ideal for long-term investors who want to stay invested for extended periods, leveraging the power of compounding. Trigger SIP A Trigger SIP is more sophisticated and is suited for experienced investors who want to invest based on certain triggers. These triggers could be market levels, index values, or specific dates. While Trigger SIPs offer the opportunity to capitalize on market movements, they require a good understanding of market dynamics and regular monitoring.

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What are various types of mutual funds?

If you are thinking of diversifying your investments, there are various types of mutual fund options that you can opt for. They can be categorised based on various characteristics like asset class, investment goals and risk.

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Master Mutual Funds with our Certified Course | Quest by Finology

Unlock the potential of Mutual Funds with our comprehensive course. Discover the fundamentals, types, tax treatments, benefits, and evaluation techniques. Take the first step towards wise investing and contributing to India's financial growth!