Types of Mutual Fund.

According to invest in asset Mutual Fund can be divided into three types. Types of Mutual Fund are:

1) Equity Mutual Fund.

2) Debt Mutual Fund.

3) Hybrid Mutual Fund.

1) EQUITY MUTUAL FUND :

          Equity Mutual Fund means the fund that is invested in stock or equity market. Equity mutual fund can be divided into eight type. They are:

1.1) Large Cap Fund.

1.2) Mid Cap Fund.

1.3) Small Cap Fund.

1.4) Sector Fund.

1.5) Diversified Equity Fund.

1.6) Dividend Yield Schemes.

1.7) ELSS. 

1.8) Thematic Fund.

1.1,2,3) Large,Mid,Small Cap Fund :

            Before understanding the large cap fund you should know about Market Capitalization (Market Cap). Market cap indicate the size of company. According to market cap companies are divided into three types like large cap,mid cap and small cap companies. Generally companies that have market cap below 5000 crore rupees are called small cap companies, that have market cap between 5000-100000 crore rupees are called mid cap companies, that have market cap above 100000 crore rupees are called large cap companies. Small cap, mid cap, large cap companies have no fixed criteria of measuring. Some years ago companies that had market cap above 50000 crores rupees were called large cap companies. Most of  Large cap companies are the market leader of their sector. Large cap companies are big and well established. This companies can survive in bad financial time because of good financial strength. For this the risk in large cap companies is less than mid cap and small cap companies. Reliance industries, ITC,TCS is the example of Large cap companies. They reached to their success so growth in large cap companies is constant and limited. Small cap companies are in developing stage so growth opportunities in this companies are too high. On the other hand failure rate of this companies is also too high. So the fund which is invested in large cap companies is called large cap fund. The fund which is used to invest in mid cap companies is called mid cap fund and similiarly the fund which is invested in small cap companies is called small cap fund.

1.4) Sector Fund :

          Sector Fund means the fund that is used to invest in specific or sector companies. Reliance Media & Entertainment fund is a sector fund that is used to invest in only in media and entertainment companies. SBI Pharma fund is also a sector fund that invest only in pharma companies.

1.5) Diversified Equity Fund :

          It means the fund that is used to invest in different size and sector companies.

1.6) Dividend Yield Fund :

 Dividend means bonus that company share to its shareholders from profit. Dividend is not compulsory for companies. Board of Director of any company decide to distribute dividend or not. Most of the cases the elligible companies of dividend yield fund are less volatile,stable and show constant growth.

1.7) ELSS :

          The full form of ELSS is Equity Linked Savings Scheme. It is a tax saving scheme. For ELSS you have to invest compulsory for 3 years. You can save tax about 1.5 lakh rupees using ELSS.

1.8) Thematic Fund :

         Thematic Fund invests in theme like rural india theme,e-commerce theme etc. For example HDFC Housing Opportunity Fund is a housing theme Fund. This fund is used to invest in the stock of housing equipments like cement,steel,paint etc.

2)  DEBT MUTUAL FUND :

       Debt Fund  invest in debt instruments like Debentures,Bond,Certificate of Deposit etc. Risk in debt fund is less but return is also less. Basically there are four types of debt fund. They are:

2.1) Gilt Fund.

2.2) Junk Bond Schemes.

2.3) Fixed Maturity Plans.

2.4) Liquid Funds.

2.1) Gilt Fund :

         The debt fund which is used to invest in Goverment securities is called Debt Fund. Goverment securities are issued by Goverment. So it have zero risk. There is two types of gilt fund. They are :

i) Short Term.

ii) Long Term.

2.2) Junk Bond Schemes :

        Junk means garbage. It have high risks but return is also high. The debt fund that invests in junk bond is called junk bond schemes.

2.3) Fixed Maturity Plans :

      Fixed maturity plans are same as bank fixed predifined plans. Fixed maturity plans invest in Certificate of Deposits,Commercial Papers, Corporate Bond etc. Generally return of fixed maturity plans is better than bank FD returns.

2.4) Liquid Fund :

 Liquid fund invests in Money Market Instruments like Certificate of Deposits, Treasury Bills, Commercial Papers, Term Deposits etc. Return of liquid fund is better than bank savings account and it is less volatile and it have less risk. For this it is good for short term investing.

3) HYBRID MUTUAL FUND :

      Hybrid fund invests in more than one asset classes. It invests in equity fund and also debt fund. Hybrid fund can be divided into three groups like

3.1) Monthly Income Plan (MIP).

3.2) Balanced Fund.

3.3) Arbitrage Fund.

3.1) Monthly Income Plan (MIP) :

     In MIP about 86% to 90% of fund is invested in debt instruments and rest of the fund is used to invest in equity or stock market. As most of fund is invested in debt fund so it is safe. But it is not risk free and fixed return plan. Because  MIP also invests in stock market.

3.2) Balanced Fund :

       Here about 65% to 85% of the fund is used to invest in equity or stock market and rest of the fund is used to invest in debt fund. Equity helps balanced fund for good returns and debt fund helps balanced fund to make it safe.

3.3) Arbitrage Fund :

        If share price of any company is different in stock market and derivative market then money can be earned from it from doing arbitraging. More than 65% of this fund is used to invest in equity market. The fund is safe but return is volatile. Returns of it is about 6-10%.

      According to stucture mutual fund can be divided in two groups :

A) CLOSE ENDED FUND.

B) OPEN ENDED FUND.

INTERVAL FUND is also considered.

        Investors invest in mutual fund either close ended or open ended fund. Investors can buy or sell units of open ended fund anytime. In close ended fund you can not buy or sell units anytime. You can invest in close ended fund when fund manager declared NFO. It have also fixed maturity plans. Close ended fund is listed in stock exchange. You can buy or sell it from stock exchange. But buyer or seller of close ended fund is not too available. So you have to face problems when you buy or sell the unit of it. Open ended fund can issue more units but close ended fund has fixed units. Most of Mutual Funds are open ended fund.

     Depend on the managing of FUND mutual fund can be seperated into two groups. They are:

#) Actively Managed Fund.

##) Passively Managed Fund.

        In actively managed fund fund manager actively participates to choose where to invest. On the other hand in passively managed fund fund manager does not directly participate. Fund is just propotionally invested in indices like Nifty,sensex and others.

Another types of fund are:

*) Exchange Traded Fund or ETF.

**) Real Estate Fund.

***) Gold Fund.

****) International Fund etc.

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