Types of mutual funds schemes
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There are several types of mutual fund schemes. Schemes are categorized based on maturity period as open-ended or close-ended funds. Open-ended funds allow continuous subscription and redemption, while close-ended funds have a fixed duration. Schemes are also categorized based on investment objective as growth/equity oriented (focusing on capital appreciation), income/debt oriented (focusing on fixed income securities), balanced (combining equity and debt), money market/liquid (prioritizing capital preservation and liquidity), gilt (investing in government securities), and index funds (replicating the components of a market index). The document provides details on each type of scheme.
Types of mutual funds schemes
- 1. Types Of Mutual Funds Schemes By:- Pawan Singh Raikhola (1664880012) MBA Integrated 5th semester
- 2. What Is mutual Fund? A mutual fund collects money from investors and invests the money on their behalf. It charges a small fee for managing the money. Mutual Funds are an ideal investment vehicle for regular investors who do not know much about investing. Investors can choose a mutual fund scheme based on their financial goal and start investing to achieve the goal.
- 3. Schemes According To Maturity Period Open Ended Fund Scheme Close Ended Fund Scheme Schemes According To Investment Objective- Growth / Equity Oriented Scheme Income / Debt Oriented Scheme Balanced Fund Money Market or Liquid Fund Gilt Fund Index Funds
- 4. Schemes According To Maturity Period Open Ended Fund Scheme An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis. These schemes do not have a fixed maturity period. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices which are declared on a daily basis. The key feature of open-end schemes is liquidity.
- 5. Close Ended Fund Scheme A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is open for subscription only during a specified period at the time of launch of the scheme. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where the units are listed.
- 6. Schemes According To Investment Objective Growth / Equity Oriented Scheme The aim of growth funds is to provide capital appreciation over the medium to long- term. Such schemes normally invest a major part of their corpus in equities. Such funds have comparatively high risks. These schemes provide different options to the investors like dividend option, capital appreciation, etc. and the investors may choose an option depending on their preferences.
- 7. • Income / Debt Oriented Scheme The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures, Government securities and money market instruments. Such funds are less risky compared to equity schemes. These funds are not affected because of fluctuations in equity markets
- 8. • Balanced Fund The aim of balanced funds is to provide both growth and regular income as such schemes invest both in equities and fixed income securities in the proportion indicated in their offer documents. These are appropriate for investors looking for moderate growth. They generally invest 40-60% in equity and debt instruments.
- 9. • Money Market or Liquid Fund These funds are also income funds and their aim is to provide easy liquidity, preservation of capital and moderate income. These schemes invest exclusively in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter- bank call money, government securities, etc. Returns on these schemes fluctuate much less compared to other funds.
- 10. • Gilt Fund These funds invest exclusively in government securities. Government securities have no default risk. NAVs of these schemes also fluctuate due to change in interest rates and other economic factors as is the case with income or debt oriented schemes.
- 11. • Index Funds Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index, S&P NSE 50 index (Nifty), etc These schemes invest in the securities in the same weightage comprising of an index. NAVs of such schemes would rise or fall in accordance with the rise or fall in the index, though not exactly by the same percentage due to some factors known as "tracking error" in technical terms. Necessary disclosures in this regard are made in the offer document of the mutual fund scheme.
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