What is a Mutual Fund?
A mutual fund is a trust which is predefined investment objective with a professional management that pools the money in the form of savings from a number of investors whose common goal on financial markets and invested in a diversified portfolio of financial instruments i.e., equities, bonds, etc. At on expiry date the fund is appreciated with the skills of professional management and allocated to investors based on their agreement.

Mutual Funds by structure:
Mutual fund schemes may be classified on the basis of their structure and their investment objective

Open-ended Funds
An Open-ended Fund is available for subscription all over the year and don not have any expiry date and which can be freely buy and sell whenever we need at Net Asset Value.

Close-ended Funds
A Close-ended Fund having a predefined maturity period for subscription and having a particular maturity date and the tenure. The investor can invest at the time of initial issue and there after buy and sell through exchange, if listed. The listed market price will vary based on demand and supply and other factors.

Mutual funds by plan:
Systematic Investment Plan (SIP)
An option for an investor to pay the number of installment as SIP through bank transfer, post-dated cheque, cash in favour of fund. The specified units has been allocated to the investor which predetermined in the offer document at applicable NAV.

Systematic Transfer Plan (STP)
Plan is used to transfer investment from one type of asset to another type.
STP is of two types:
Fixed STP
Investors take out a fixed sum from one investment to another

Capital appreciation STP
Investors take the profit part out of one investment and invest in the other.

Systematic Encashment Plan (SEP)
Plan permits the investor the facility to extract a pre-determined amount/unit from his fund at a pre-determined interval. The investor’s units will be redeemed at the applicable NAV as on that day.

Systematic Withdrawal Plan (SWP)
Plan which allows an investor to withdraw a fixed or variable amount from his mutual fund scheme on a pre-set date every month, quarterly, semi-annually or annually as per his needs.

Mutual Funds by Investment objective:
Growth Funds
The aim of growth funds which are invest in a corpus of equity to provide capital appreciation over the medium to long term.
Income Funds
The main aim to these funds is to flow the regular income through capital stability. Investors invested majorly bonds, corporate debentures and Government securities.
Balanced Funds
This is a fund mixture of both equities and fixed income securities in a said proportion to maintain balance the growth and regular income to the investor. Simply, balanced fund is a combination of growth and income.
Money Market Funds
To provide easy liquidity, preservation of capital and moderate income. Mostly, invest in safer short-term instruments such as T-Bills, Certificates of Deposit, Commercial Paper etc., but these are influence with the interest rates. These are ideal for corporate and individual investors as a means to park their surplus funds for short periods.
Liquid Funds:
These are also kind of money market fund only. Invests in Treasury bills, debt schemes which are less than a year duration and one will get returns better than savings account able to convert into STP (Systematic Transfer Plans) to other funds/saving schemes.
Sector Funds:
The investment made in a fund which is operating business on a particular sector or industry solely by the professionals in a mutual fund. There is an inherent lack of diversification associated with these funds.

Mutual Funds by equity related schemes:
Equity Diversified Funds
If one can bear the risk, better to invest in equity because the risk is high based on market fluctuation. To get good amount of returns, one should wait minimum of 7 years.

Equity Linked Savings Scheme
These are tax savings funds under section 80C, you can get tax benefit till Rs.1.50 Lakhs and should maintain at least 3 years.

Tax Saving Schemes
The funds are come up with tax benefits, rebates and incentives under sec 80C of the Indian income tax viz., equity linked, child schemes to the investor and are advised to consult their financial advisors before investing.

Index Schemes
Index Funds are moved with respect to convergence or parallel to the performance of a particular index such as the BSE Sensex or the NSE S&P CNX 50.

Sectoral Schemes
These types of funds as designed especially based on industry or sector like real estate, banking, steel etc., which carry higher risk compared with equity scheme due less diversification due to restricted to specified.

Mutual Funds by fund specialty:
Capital Protection Funds:
These are funds where funds are split between investment in fixed income instruments and equity markets. This is done to ensure protection of the principal that has been invested.

Fixed Maturity Funds:
Fixed maturity funds are those in which the assets are invested in debt and money market instruments where the maturity date is either the same as that of the fund or earlier than it.

Pension Funds:
These funds are invested with a view of long-term investment due to the provisions made by the fund as regular income at or after the time of retirement. These are combination or split in to equity and debt because equity will give good return but risky while debt are low risk and low returns give steady returns in long-run. One may convert as a pension or take lump sum as per the agreement

Fund of funds:
The term is itself defines as multi manageable funds that can invest in other mutual funds and returns depend on the performance of the target fund which are considered as relatively safe because the funds that investors invest in actually hold other funds under them thereby adjusting for risk from any one fund.

Emerging market funds:
These funds are in convergence with political and economic situation which carry higher risk where investments are made in developing countries that show good prospects for the future.

International funds:
Funds from foreign offer investments in companies which are belongs to emerging economies located in other parts of the world. The only companies that won’t be invested in will be those located in the investor’s own country.

Global funds:
Funds where the investment made by the fund can be in a company in any part of the world. They are different from international/foreign funds because in global funds, investments can be made even the investor’s own country.

Real estate funds:
Funds that invest in companies that operate in the real estate sector such as in realtors, builders, property management companies and even in companies providing loans.

Commodity focused stock funds:
Funds invest in companies that are working in the commodities market, such as mining companies or producers of commodities but not directly on commodity markets. These funds can, at times, perform the same way the commodity is as a result of their association with their production.

Market neutral funds:
Funds invest in treasury bills, ETFs and securities and try to target a fixed and steady growth but not invest in the markets directly.

Inverse/leveraged funds:
These funds are come up in divergence to markets. Earnings from these funds happen when the markets fall and when markets do well these funds tend to go into loss. The fund gives massive losses and huge returns depends on the risk that investor may carry.

Asset allocation funds:
These funds are carry two variants i.e., target date fund and target allocation fund. The financial professionals in the mutual fund are made adjustments to the allocated assets to get returns and invested in various investments like bonds, equity etc.,

Gift Funds:
Gift funds are mutual funds where the funds are invested in government securities for a long term which are virtually risk free and can be the ideal investment to those who don’t want to take risks.

Exchange traded funds:
Funds that are a mix of both open and close ended mutual funds and are traded on the stock markets which are not actively managed and can offer a lot of liquidity, tend to have lower service charges associated with them.

Mutual funds by option:
Growth Option
Dividend is not paid-out under a Growth Plan and the investor realises only the capital appreciation on the investment by an increase in NAV.
Dividend Pay-out Option
Dividends are paid-out to investors under a Dividend Pay-out Option. However, the NAV of the mutual fund scheme falls to the extent of the dividend pay-out.
Dividend Re-investment Plan
Dividend accrued on mutual funds is automatically re-invested in purchasing additional units in open-ended funds and offer the investor an option of collecting dividends or re-investing the same.
Retirement Pension Plan
Some schemes are linked with retirement pension. Individuals participate in these plans for themselves, and corporates participate for their employees.
Insurance Plan
Certain Funds offer some schemes that offer insurance cover to investors.