An investment fund that pools the capital of numerous investors to buy securities is called a mutual fund. Mutual funds are frequently categorised as money market funds, bond or fixed income funds, stock or equity funds, or hybrid funds based on their primary investments.
Funds can also be classified as actively managed funds, which aim to beat stock market indices but typically charge higher fees, or index funds, which are passively managed funds that follow the performance of an index, such as a stock market index or bond market index.
Unit investment trusts, closed-end funds, and open-end funds are the three main types of mutual fund structures. Passively managed funds routinely beat actively managed funds over extended periods of time.
Under the SEBI (Mutual Funds) regulations of 1996, the Government of India’s securities and commodities market regulator oversees mutual funds in India. AMFI, a trade association of all fund houses, is in charge of the mutual fund industry’s operational aspects. Established in August 1995, the organisation launched the Mutual Funds Sahi hai campaign in March 2017 to raise investor awareness of mutual funds in India.
The four main types of mutual funds are Equity Funds, Debt Funds, Hybrid Funds, and Money Market Funds. Equity Funds invest primarily in stocks, Debt Funds invest in bonds, Hybrid Funds invest in both stocks and bonds, and Money Market Funds invest in short-term debt instruments.
Here, PSU Connect shares more detailed breakdown:
Equity Funds: These funds invest in stocks of companies, with the primary objective of capital appreciation. They can be further categorized by market capitalization (large-cap, mid-cap, small-cap) or by industry/sector.
Debt Funds: These funds invest in fixed-income securities like bonds, offering a relatively stable income stream. They can be further categorized by maturity (short-term, intermediate-term, long-term) or by credit quality.
Hybrid Funds: These funds invest in a mix of both stocks and bonds, aiming for a balance between capital appreciation and income. They are often used for investors who want a more diversified portfolio with a mix of growth and stability.
Money Market Funds:
These funds invest in short-term, highly liquid debt instruments like Treasury bills and commercial paper, offering very low risk and modest returns. They are often used as a place to park funds while waiting for other investment opportunities
