There are various Types of Mutual Funds in India

Based on your specific investment requirement, you can invest in different types of mutual funds – Scroll down to know more about them.

Equity Mutual Funds

These funds primarily invest in stocks / shares of companies with a primary aim of generating greater returns than the market index. They are further broken into different sub types of mutual funds

  • Large Cap Funds: Invest in top 1 to 100 companies by market capitalisation in India
  • Mid-cap funds: Invest in top 100 to 250 companies by market capitalisation in India
  • Small cap funds: Invest in companies ranked 250 and more by market capitalisation in India
  • Diversified equity funds: In a mix of companies of various sizes.
  • Sector specific funds: Focus on specific sectors like Banking, IT, Infrastructure, Pharma
  • Tax savings funds (ELSS) – Give tax saving benefits under Section 80C

Equity Mutual funds are suitable for long term investments because while they provide higher returns, they maybe volatile in the short term due to increased risk in market movements. 

They are primarily used for wealth creation and growing your capital and hence are also known as growth funds.

Expected Returns: 12.5 to 15% average annual returns

Debt Mutual Funds

These funds primarily invest in bonds and securities issued by governments and companies with a primary aim of generating stable and predictable returns. They are further broken into different sub types of mutual funds

  • Gilt funds
  • Monthly Income Plans
  • Short term plans
  • Liquid funds

Debt Funds can be a great way diversify your portfolio and are suitable for short term investments or for those scenarios where the primary objective is capital preservation and generating a regular income or ‘pension’

Expected Returns: 6.75 to 9% average annual returns

Balanced Mutual Funds

These are also known as hybrid mutual funds as they invest in a mix of debt and equity products to give stability and growth. These types of mutual funds are suitable for low risk and first time investors.

All the above types can be open ended or closed ended.

  • Open Ended Funds: means you can withdraw your money anytime you wish
  • Closed Ended Funds: means there is a specific lockin in period before which you cannot withdraw your money. E.g. Tax Saving ELSS mutual funds have a lockin period of 3 years.

Types of Mutual Funds

In India, there are 38 different mutual fund management companies which offer various types of schemes.

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