Type of Mutual Fund Schemes/Funds
Mutual funds operate various types of schemes. These schemes are designed according to various common investment objectives. These investment objectives will be differ by investor to investor according to their need, age, period of holding, risk capacity etc. These Schemes or funds can be categorized on the basis of their structure, entry & exit facility, fund management style, objectives of funds etc.
On the basis of structure it can be classified as :
* Open-Ended Funds
* Close-Ended Funds
* Interval Funds
Open-Ended Funds
These types of funds are open for investors to entry into funds at the time of NFO (New Fund Offer) or exit from funds any time.
Close-Ended Funds
Investors can enter into this type of
Interval Funds
These types of funds provide feature of above both types of funds i.e. open-ended funds and close ended funds. These types of funds are mainly close-ended but for a specified time period it becomes open-ended.
On the basis of style of fund management it can be classified as :
* Active Funds
* Passive Funds
Active Funds
In these types of funds, role of fund manager is very important. He has the flexibility to choose the investment portfolio, according to the investment objective of the scheme. The expenses for running the fund will be higher. Investors expect from these funds to perform better than the market.
Passive Funds
These funds run on the basis of a specified index, whose performance it seeks to track. For example, a passive fund tracking the BSE Sensex would buy only the shares that are part of the composition of the BSE Sensex in same proportion of each share in the portfolio of scheme as the weightage assigned to the share in the computation of the BSE Sensex. Therefore performances of these funds are same as concerned index. These schemes are also called index schemes. These funds have low running costs.
On the basis of structure of fund it can be classified as :
* Equity funds
* Debt funds
* Hybrid funds
* Liquid funds or Money Manager Funds
Equity Funds
These types of funds invest largely in equity shares and equity-related investments. Risk and return is very high.
Read more about Equity Funds
Debt Funds
These schemes focused with an investment objective that limits them securities like Treasury Bills, Government Securities, Bonds and Debentures. These have relatively low risk.
Read more about Debt Funds
Hybrid Funds
These funds constitute with both type of funds i.e. equity funds and debt funds.
Read more about Hybrid Funds
Liquid Funds or Money Market Funds
These funds invest only in money market securities that matures within 91 days.These are the lowest in risk among all kinds of mutual fund schemes.--