Categories Of Mutual Funds Based On Indicators

By Author: Arvind
Total Articles: 9
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Mutual Funds serve as investment tools that enhance your wealth. They enable the realization of your financial aspirations. Hence, many opt for them to build their wealth. A Mutual Funds Investment involves various types. Each type satisfies a unique investment requirement. Typically, these types are categorized based on specific indicators.

They are as follows:

Based on asset class

Equity Funds


Equity Funds deal mainly in stocks. They invest in stocks of different companies. Based on your invested amount, they are further classified as Large-, Mid-, Small-, and Multi-Cap Funds. They are also the most preferred option among investors. This is because they reap high returns and can grow your funds quickly.

Debt Funds


Debt Funds are among the popular types of Mutual Funds. They invest in low-risk income securities. One of them is government securities. Such funds also come with a fixed maturity date. Their interest rates match the requirements of those who prefer low risks.

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Hybrid Funds


These funds invest a portion of their corpus in Equity Funds. The remaining amount gets invested in Debt Funds. Although these funds come with significant risks, their returns are equally high.

Money Market Funds


Money Market Mutual Funds invest in cash-equivalent securities. Their returns are in the form of regular dividends. These funds are ideal, especially if you are a novice investor. This is because they have a lower risk rate and can be opted for short-term investments.

Based on structure

Open-Ended Funds


These are the best Mutual Funds to invest in, as they do not have restrictions on the number of units traded. Their duration is also exempt from such constraints. This lets you trade or exit from the scheme at your convenience.

Close Ended Funds


The investable unit capital in such funds is fixed. Hence, they are known as Close-Ended Funds. Also, such funds do not allow extensive selling. This means you cannot sell more units than expected. The maturity period of these funds is also fixed. It cannot be changed during the entirety of the tenure. Hence, market experts usually prefer this Mutual Fund. It is not suitable for first-time investors.

Interval Funds


Interval Funds let you adjust at specific intervals. Through such funds, they may buy or exit only at predetermined intervals. The company decides these intervals. You can also invest through a Systematic Investment Plan or a Lumpsum Investment. In the former, you invest a small sum regularly. In the latter, you invest a sizeable chunk in one go.

Interval Funds are available to you only for a specific period. Usually, they are expected to continue the scheme for at least two years. Hence, opt for this scheme to park your investments for a while.