Types of mutual funds in India in 2020

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Types of mutual funds in India

As per AMFI India, there are more than 17000+ different mutual funds available to invest in India. As a retail investor, it often becomes challenging to understand the difference between different various types of mutual funds in India.

Types of mutual funds in India can be broadly categorized into 2 categories:-

  1. Close ended mutual funds
  2. Open ended mutual funds

Consider reading

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India

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What is Penny stock? – List of penny stock in India

Different types of close-ended mutual funds

Different types of close ended mutual funds
Different types of close ended mutual funds

Different types of open-ended mutual funds

Different types of open-ended mutual funds
Different types of open-ended mutual funds

Different types of equity mutual funds

Different types of equity mutual funds
Different types of equity mutual funds

Equity mutual fund Categorization

On October 6 2017, SEBI came out with circular to categorize equity mutual funds based on below criteria:-

Category of SchemesScheme CharacteristicsType of scheme (uniform description of scheme)
Multi-Cap FundMinimum investment in equity & equity related instruments- 65% of total assetsMulti Cap Fund- An open ended equity scheme investing across large cap, mid cap, small cap stocks
Large Cap FundMinimum investment in equity & equity related instruments of large cap companies- 80% of total assetsLarge Cap Fund- An open-ended equity scheme predominantly investing in large-cap stocks
Large & Mid Cap FundMinimum investment in equity & equity related instruments of large cap companies- 35% of total assets
Minimum investment in equity & equity related instruments of mid cap stocks- 35% of total assets
Large & Mid Cap Fund- An open ended equity scheme investing in both large cap and mid cap stocks
Mid Cap FundMinimum investment in equity & equity related instruments of mid cap companies- 65% of total assetsMid Cap Fund- An open ended equity scheme predominantly investing in mid cap stocks
Small-cap FundMinimum investment in equity & equity related instruments of small cap companies- 65% of total assetsSmall Cap Fund- An open ended equity scheme predominantly investing in small cap stocks
Dividend Yield FundScheme should predominantly invest in dividend yielding stocks.
Minimum investment in equity- 65% of total assets
An open ended equity scheme predominantly investing in dividend yielding stocks
Value Fund*Scheme should follow a value investment strategy.
Minimum investment in equity & equity related instruments – 65% of total assets
An open ended equity scheme following a value investment strategy
Contra Fund*Scheme should follow a contrarian investment strategy.
Minimum investment in equity & equity related instruments – 65% of total assets
An open ended equity scheme following contrarian investment strategy
Focused FundA scheme focused on the number of stocks (maximum 30)
Minimum investment in equity & equity related instruments – 65% of total assets
An open ended equity scheme investing in maximum 30 stocks (mention where the scheme intends to focus, viz.,multi cap, large cap, mid cap, small cap)
Sectoral/ ThematicMinimum investment in equity & equity related instruments of a particular sector/ particular theme- 80% of total assetsAn open ended equity scheme investing in __ sector (mention the sector)/
An open ended equity scheme following __ theme (mention the theme)
ELSSMinimum investment in equity & equity related instruments – 80% of total assets (in accordance with Equity Linked Saving Scheme, 2005 notified by Ministry of Finance)An open ended equity linked saving scheme with a statutory lock in of 3 years and tax benefit
SEBI Categorization of equity mutual funds

Different types of debt mutual funds

Different types of debt mutual funds
Different types of debt mutual funds

Debt mutual fund Categorization

On October 6 2017, SEBI came out with circular to categorize debt mutual funds based on below criteria:-

Category of SchemesScheme CharacteristicsType of scheme (uniform description of the scheme)
Overnight FundInvestment in overnight securities having maturity of 1 dayAn open ended debt scheme investing in overnight securities
Liquid Fund Investment in Debt and money market securities with maturity of upto 91 days onlyAn open ended liquid scheme
Ultra Short Duration FundInvestment in Debt & Money Market instruments such that the Macaulay duration of the portfolio is between 3 months – 6 monthsAn open ended ultra-short term debt scheme investing in instruments with Macaulay duration between 3 months and 6 months 
Low Duration FundInvestment in Debt & Money Market instruments such that the Macaulay duration of the portfolio is between 6 months- 12 monthsAn open ended low duration debt scheme investing in instruments with Macaulay duration between 6 months and 12 months
Money Market FundInvestment in Money Market instruments having maturity upto 1 yearAn open ended debt scheme investing in money market instruments
Short Duration FundInvestment in Debt & Money Market instruments such that the Macaulay duration of the portfolio is between 1 year – 3 yearsAn open ended short term debt scheme investing in instruments with Macaulay duration between 1 year and 3 years 
Medium Duration FundInvestment in Debt & Money Market instruments such that the Macaulay duration of the portfolio is between 3 years – 4 yearsAn open ended medium term debt scheme investing in instruments with Macaulay duration between 3 years and 4 years 
Medium to Long Duration FundInvestment in Debt & Money Market instruments such that the Macaulay duration of the portfolio is between 4 – 7 yearsAn open ended medium term debt scheme investing in instruments with Macaulay duration between 4 years and 7 years 
Long Duration FundInvestment in Debt & Money Market Instruments such that the Macaulay duration of the portfolio is greater than 7 yearsAn open ended debt scheme investing in instruments with Macaulay duration greater than 7 years
Dynamic BondInvestment across durationAn open ended dynamic debt scheme investing across duration
Corporate Bond FundMinimum investment in corporate bonds- 80% of total assets (only in highest rated instruments)An open ended debt scheme predominantly investing in highest rated corporate bonds
Credit Risk FundMinimum investment in corporate bonds- 65% of total assets (investment in below highest rated instruments)An open ended debt scheme investing in below highest rated corporate bonds
Banking and PSU FundMinimum investment in Debt instruments of banks, Public Sector Undertakings, Public Financial Institutions- 80% of total assetsAn open ended debt scheme predominantly investing in Debt instruments of banks, Public Sector Undertakings, Public Financial Institutions
Gilt FundMinimum investment in Gsecs- 80% of total assets (across maturity)An open ended debt scheme investing in government securities across maturity
Gilt Fund with 10 year constant durationMinimum investment in Gsecs- 80% of total assets such that the Macaulay duration of the portfolio is equal to 10 yearsAn open ended debt scheme investing in government securities having a constant maturity of 10 years
Floater FundMinimum investment in floating rate instruments- 65% of total assetsAn open ended debt scheme predominantly investing in floating rate instruments
SEBI Categorization of debt mutual funds

Different types of hybrid mutual funds

Different types of hybrid mutual funds
Different types of hybrid mutual funds

Hybrid mutual fund Categorization

On October 6 2017, SEBI came out with circular to categorize hybrid mutual funds based on below criteria:-

Category of SchemesScheme CharacteristicsType of scheme (uniform description of the scheme)
Conservative Hybrid FundInvestment in equity & equity related instruments- between 10% and 25% of total assets; Investment in Debt instruments- between 75% and 90% of total assetsAn open ended hybrid scheme investing predominantly in debt instruments
Balanced Hybrid FundEquity & Equity related instruments- between 40% and 60% of total assets;
Debt instruments- between 40% and 60% of total assets
No Arbitrage would be permitted in this scheme
An open ended balanced scheme investing in equity and debt instruments
Aggressive Hybrid FundEquity & Equity related instruments- between 65% and 80% of total assets;
Debt instruments- between 20% 35% of total assets
An open ended hybrid scheme investing predominantly in equity and equity related instruments
Dynamic Asset Allocation or
Balanced Advantage
Investment in equity/ debt that is managed dynamicallyAn open ended dynamic asset allocation fund
Multi-Asset AllocationInvests in at least three asset classes with a minimum allocation of at least 10% each in all three asset classesAn open-ended scheme investing in multiple asset classes
Arbitrage FundScheme following arbitrage strategy. Minimum investment in equity & equity related instruments- 65% of total assetsAn open ended scheme investing in arbitrage opportunities
Equity SavingsMinimum investment in equity & equity related instruments- 65% of total assets and minimum investment in debt- 10% of total assets
Minimum hedged & unhedged to be stated in the SID.
Asset Allocation under defensive considerations may also be stated in the Offer Document
An open ended scheme investing in equity, arbitrage and debt
SEBI Categorization of hybrid mutual funds

Different types of Solution-oriented mutual funds

Different types of Solution-oriented mutual funds
Different types of Solution-oriented mutual funds

Solution oriented mutual fund Categorization

On October 6 2017, SEBI came out with circular to categorize Solution-oriented mutual funds based on below criteria:-

Category of SchemesScheme CharacteristicsType of scheme (uniform description of the scheme)
Retirement FundScheme having a lock-in for at least 5 years or till retirement age whichever is earlierAn open-ended retirement solution-oriented scheme having a lock-in of 5 years or till retirement age (whichever is earlier)
Children’s FundScheme having a lock-in for at least 5 years or till the child attains age of majority whichever is earlierAn open ended fund for investment for children having a lock-in for at least 5 years or till the child attains age of majority (whichever is earlier)
SEBI Categorization of Solution oriented mutual funds

Different types of other mutual funds schemes

Different types of other mutual funds schemes
Other SchemesDifferent types of other mutual funds schemes

Other schemes mutual fund Categorization

Category of SchemesScheme CharacteristicsType of scheme (uniform description of scheme)
Index Funds/ ETFsThe minimum investment in securities of a particular index (which is being replicated/ tracked)- 95% of total assetsAn open ended scheme replicating/ tracking _ index
FoFs – Fund of funds (Overseas/ Domestic)Minimum investment in the underlying fund- 95% of total assetsAn open ended fund of fund scheme investing in other mutual funds.
SEBI Categorization of Other schemes mutual funds

Types of mutual funds in India – how to select the right fund type?

Selecting the right mutual fund type can be a daunting task. You need to be careful while selecting a mutual fund to invest in. Before you start investing in a mutual fund ask yourself below questions:-

  1. The time period of investment
  2. willingness to take risk
  3. Liquidity requirements

It’s often seen that many close-ended mutual funds are sold with higher returns promise to investors. The investor doesn’t realize the terms and conditions of the fund and ends up losing the entire capital.

So when you invest in any type of mutual fund in India, always ask yourself- which type of mutual fund investment you are doing? what is the risk involved in that?

What are the risk involved in different types of mutual funds?

There is always risk involved in any investment you do. In mutual funds depending on the type of fund you invest the risk varies.

Equity mutual funds carry the highest risk as your money is invested into stocks. If the stock market does well then you get excellent returns but when the stock market falls then you lose money.

Hybrid mutual funds carry less risk compared to equity funds but they have some element of risk as they invest in mix of both equity and debt.

Debt mutual funds have less risk as compared to equity and hybrid mutual funds as they invest money in debt instruments which are relatively safe than equity mutual funds. But recently it’s seen that the debt mutual funds have started giving huge negative returns depending on the fund you have to invest in. So be careful while selecting a debt mutual fund. Read more about – Are debt funds safe?

Types of mutual funds in India – How to select a mutual fund?

Before you select a mutual fund to invest in. You must evaluate the fund. Here are the 5 factors you must consider before selecting a fund:-

  1. What is the Long Term Record of the Mutual fund?
  2. Who is the Fund Manager for the mutual fund?
  3. What is the track record of the AUM for the Fund?
  4. What is the Risk vs Return Record for the fund?
  5. What is the TER for the Fund?

Read more about selecting a mutual fund here – How to select mutual funds India?

Types of mutual funds in India – FAQs

What are the different types of mutual funds in India?

The main types of mutual funds are

Equity mutual fund
Debt Mutual fund
Hybrid mutual fund
Solution-oriented mutual fund
Other Schemes

What are the different kinds of equity funds?

Different type of equity mutual funds are

Large cap
Large & mid cap
Multi cap
Mid cap
Small cap
Value
ELSS
Contra
Dividend yield
Focussed
Sector/thematic

What is the safest mutual fund?

Debt mutual funds investing in Govt bonds are considered as safest mutual funds. Also Overnight funds and Liquid funds are considered as relatively safe compared with other types of mutual funds.

Which mutual fund is best for beginners?

For beginners with a long term investment view below mutual funds types are best
Large cap mutual fund
Multi cap mutual fund
Index funds

What is Blue Chip Fund?

A blue chip fund is a mutual fund which invested its money blue chip companies typically large cap companies.

What are the different types of debt mutual funds?

There are 17 types of debt mutual funds in India and they are:-
Long duration
Medium to long duration
Medium duration
Short duration
Low duration
Ultra short duration
Liquid
Money Market
Overnight
Dynamic bond 
Corporate bond
Credit risk
Banking & PSU
Floater
FMP
Gilt
Gilt 10 year constant duration


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