Types of Mutual Funds

Based on Structure

• Open-ended Mutual Funds

According to the Securities and Exchange Board of India (SEBI), open-ended mutual funds allow buyers that they can conveniently buy and sell units at NAV (Net Asset Value). The main motto of an open-ended mutual fund is Liquidity. There is no maturity period.

• Close-ended Mutual Funds

In this scheme, a buyer can purchase units during the initial offer period and redeem them at a specified maturity date. Once the units are purchased, they can be sold only through a stock exchange at the prevailing price of the shares.

• Interval Funds

In this scheme, units/shares can be bought or sold only at a pre-agreed time like 15 days or another time period. Similar to open-ended mutual funds, units can’t be listed on Stock Exchange. The best thing about the Interval fund, it’s helpful for the short term and the major drawback is it doesn’t provide high returns.

Based on Asset Class

• Equity Funds

An Equity Fund (also known as a Growth fund) invests in the equity/shares of a company. This scheme is a great investment option for those investors who can take a high risk with a possibility of higher gain/loss.

• Debt Funds

Also considered a Fixed income Fund as it invests in fixed income securities like Debentures, corporate bonds, Government securities, and other money market instruments. There are various advantages of investing in these funds are high liquidity, Stable Return, and low risk.

• Money Market Funds

Money market mutual funds that invest in liquid instruments like Treasury Bill, Treasury Bonds, etc. The scheme offers investors high liquidity with low risk.

• Hybrid Funds

Hybrid funds (also known as Balance funds) invest in more than one asset class. It’s diversifying the portfolio with an aim to reduce the risk involved. It’s considered to be a bit riskier than debt funds and safer than equity funds.