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Top 3 Types Of Mutual Fund In India | In English

Top 3 Types Of Mutual Fund In India 

Top 3 Types Of Mutual Fund In India
Top 3 Types Of Mutual Fund In India

Most  Top 3 Types of mutual funds invest in two broad categories of asset classes- Equity Debt Equity Funds invest in companies by buying shares of companies. And Debt funds lend money to companies and generate returns. So keeping this in mind, let us take a look at the different types of funds now.
Low-Risk Funds Surprised? Yes, there are mutual funds that are low risk. And these funds are in the Debt funds category. They lend money only to Top-rated companies, that too only for a short period. And that’s why the two risks debt funds face — credit risk and interest rate risks — are minimal for them. These funds are ideal if you are looking to put aside money for a period of 1 day to 3 years.
There are 3 types of Mutual Funds under this category:-
A. Liquid Funds -  These funds buy bonds whose maturity is within the next 91 days.

B. Ultra Short Duration Fund s-  These funds buy bonds that mature in the next 3–6 months.

C. Low Duration Funds -  These funds buy bonds that mature in the next 6–12 months.

In all these cases, the borrower gives the money back at the time of bond maturity and till that time, gives interest on the money lent to them.

 Tax-saving Mutual Funds

Known as  ELSS or Equity Linked Savings Scheme mutual funds, Tax Saving Mutual Funds lets you save tax while giving you a chance to grow your money. By investing in these funds you can every year save up to Rs. 46,800 tax under Section80 C. ELSS fund’s 3-year lock-in period is the shortest amongst all tax-saving options. And their returns are also tax-efficient. These funds are typically diversified multi-cap funds that invest money in companies of all sizes and sectors, giving your money growth potential of equity while you save tax.

Moderate Risk Funds

Some debt funds fall into this category, but if you are willing to take moderate risks, Hybrid funds may be a better category to look at. Hybrid funds are a category of funds that invest in both equity and debt. Here are some categories you can consider: A: Aggressive Hybrid Funds: These funds allocate more inequity and try to grow their money, and put a little money in debt to provide stability. If you want downside protection along with growth, then these funds are ideal for you.

 Dynamic Asset Allocation Funds

Dynamic Asset Allocation Funds are different from other Hybrid Funds because they don't have a limit on equity and debt portions These funds use financial models to decide which equity-debt combinations will give optimal returns in the current market conditions, and then allocate money according to it. Dynamic funds are great if you want to put your investments on auto-pilot and take unbiased asset allocation decisions. Hybrid funds are ideal for medium-term goals which are 3–5 years away.
High-risk Funds From debt to hybrid and now finally to pure equity funds. While we are giving them a high-risk classification, don’t get scared of them, this just means that you need to invest for at least 5 years in them With this minimum tenure, you are giving your investments enough time to ride through the ups and downs and show real growth potential.
If you want to invest in pure equity funds then you can consider one of these categories:

A. Multi cap Funds -

These invest in companies of all sizes and sectors and therefore have a diversified portfolio. They are flexible enough to change the portfolio composition as per the market conditions and hence they are better equipped to take advantage of emerging opportunities. If you want to have only one pure equity fund in your portfolio, pick a fund from this category.

B. Large-cap Funds -

These funds invest the majority of their money in large companies in India. These are the Top 100 companies in India. These are some of the biggest brands in our country. and are typically market leaders In this category relatively you can get non-volatile returns.

C. Large and Mid Cap Funds -

This fund category invests in a combination of large and mid-sized companies in India. So what you get is a portfolio of leaders of today and the potential leaders of tomorrow.

 Very High-Risk Funds

These funds, due to their investment style, or where they invest, tend to have very high risk. If you are a beginner these funds may not be for you, and even if you are an experienced investor, you should only have a small portion of their portfolio invested in them.

A. Mid Cap Funds -

These funds invest the majority of their money in mid-sized companies in India. These companies are some of the fastest-growing companies and so these funds tend to outperform other categories over the long term, but because of their size, they tend to get affected more by adverse market conditions and so the returns of these funds can be pretty volatile.

B. Small-Cap Funds -

These funds invest the majority of their money in the small companies of India. These companies are beyond the Top 250 companies by market capitalization but can grow to even become mid-caps and large caps in the future. Therefore, these funds give you the chance to invest in the potential future stars of India early and benefit from their growth. However, not every company succeeds, and for this reason, the risk and volatility are high in this category.

C. Sectoral Funds -

This category of funds invests their money in one specific sector like IT, Pharma, Banking, and so on. These funds are aimed to give you a chance to benefit from the growth of a specific sector. As these funds are not diversified, any downturn in the sector they invest in can lead to massive losses, so weigh your options well before investing in these funds.

And there you have it, the different types of funds, each with their own unique benefits. Are you looking Types Of Mutual Fund to invest in any of these? Download the ETMONEY app by clicking on the link below and invest in 0% commission direct plans of top mutual funds from each of Types Of Mutual Fund In India. It's 100% paperless and completely free And yes, don’t forget to share this article with your friends.

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