Many people are turning to mutual funds as a well-liked way to invest and increase their financial status to meet their goals before that it must be important to know how many types of mutual funds in India. In simple terms, all mutual funds in India are the type of investment that is managed by professionals. It pools money from various investors and uses it to create a diversified portfolio consisting of stocks, bonds, or a combination of both.
All mutual funds in India offer several advantages, including liquidity, diversification, and convenience. Mutual fund units can be purchased and sold by investors on any business day at the Net Asset Value (NAV) price. The pooling of funds enables investors to achieve diversification, as their money is spread across multiple securities.
Additionally, mutual funds offer convenience through systematic investment plans (SIPs), allowing investors to invest a fixed amount at regular intervals. We will discuss the different types of mutual funds in India in greater detail, highlighting their unique features and benefits.
Based on Their Structure Mutual Funds in India
The structure is one of the classifications of how many types of mutual funds in India, which refers to how the funds are managed and operated. Underneath are three different types of mutual funds in India based on their structure:
1. Open-End Mutual Funds
Open-end mutual funds are the most prevalent type of mutual funds. These mutual funds are open for subscription and redemption throughout the year. Investors can buy or sell units of open-end funds directly from the fund house at the Net Asset Value (NAV). Open-end funds are suitable for investors looking for flexibility in terms of entry and exit.
2. Closed-End Mutual Funds
Closed-end mutual funds have a fixed number of units issued through an initial public offering (IPO). After the IPO, these funds trade on stock exchanges like regular stocks.
Unlike open-end funds, closed-end funds do not issue new units or redeem existing units on a daily basis. Investors can buy or sell closed-end fund units on the secondary market at market prices. Closed-end funds are ideal for investors seeking long-term investment opportunities and are willing to trade on an exchange.
3. Interval Mutual Funds
Interval mutual funds combine features of both open-end and closed-end funds. These funds offer periodic windows, typically quarterly, semi-annually, or annually, during which investors can buy or sell units directly from the fund house.
Outside of these windows, the fund operates as a closed-end fund. Interval funds provide a balance between liquidity and stability, allowing investors to access their investments periodically while also benefiting from potential long-term returns.
Based on Asset Classes Mutual Funds in India
Investors can diversify their investments across various asset classes by investing in mutual funds. Below are the different types of mutual funds in India categorized based on asset classes. how many types of mutual funds in India are classified below as per the asset classes?
1. Equity Mutual Funds
Equity funds invest primarily in stocks or shares of companies. These funds are suitable for investors seeking long-term capital appreciation. Equity funds can further be classified based on market capitalization, such as large-cap funds, mid-cap funds, and small-cap funds. Investing in them can lead to higher returns, but also involves greater risks.
2. Debt Mutual Funds
Debt funds mainly invest in fixed-income instruments like government securities, corporate bonds, and money market instruments. These funds are considered less risky compared to equity funds and are suitable for investors looking for stable income and capital preservation.
3. Hybrid Mutual Funds
Hybrid funds, also known as balanced funds, invest in a mix of equity and debt instruments. These funds diversify across asset classes in an effort to strike a balance between risk and return.
4. Money Market Mutual Funds:
Money market funds make investments in short-term debt securities such as certificates of deposit, commercial papers, and Treasury bills. These funds provide stability and liquidity and are suitable for investors looking to park their surplus cash for the short term.
5. Gold Mutual Funds
Gold funds invest in gold or gold-related assets. These funds provide investors with exposure to the price movement of gold without the need for physical ownership. Gold funds can be a convenient way to invest in gold and hedge against inflation or market uncertainties.
Based on Investment Objectives Mutual Funds in India
This classification of how many types of mutual funds in India are designed to cater to different investment objectives, allowing investors to align their investments with their specific goals of financing different types of mutual funds in India based on investment objectives:
1. Growth Funds
Growth funds invest in the stocks of businesses with high growth potential in an effort to offer long-term capital appreciation.
2. Income Funds
Income funds primarily focus on generating regular income for investors. These funds invest in fixed-income securities such as bonds, debentures, and government securities that provide regular interest income.
3. Balanced Funds
Ballasted are the lanced funds, also known as asset allocation funds, which aim to strike a balance between capital appreciation and income generation.
4. Index Funds
Index funds try to match the performance of a certain market index, like the Sensex or the Nifty 50.
5. Sector Funds
Sector funds focus on specific sectors or industries, such as banking, technology, or healthcare. These funds invest in stocks of companies operating within a particular sector.
Based on Portfolio Management Mutual Funds in India
How many types of mutual funds in India can also be categorized based on their portfolio management strategies? Below are two different types of mutual funds in India based on portfolio management:
1. Active Funds
Expert fund managers who diligently oversee investments in order to beat the market manage active mutual funds. These managers conduct research and analysis and actively trade securities in an effort to generate higher returns.
2. Passive Funds
Passive mutual funds, also known as index funds, aim to replicate the performance of a specific market index. These funds invest in the same assets and in the exact same amounts as the underlying index instead of engaging in active security selection.
Based on Specialty Mutual Funds in India
In addition to the categories of how many types of mutual funds in India mentioned earlier, this classification of how many types of mutual funds in India can also be done which is based on their specialty. Below are different types of mutual funds in India based on specialty:
1. International Funds
International mutual funds invest in securities of companies outside the investor’s home country. These funds offer exposure to global markets and allow investors to diversify their portfolios internationally. International funds can focus on specific regions or countries, providing opportunities to benefit from global economic growth and market trends.
2. Sector-specific Funds
Sector-specific mutual funds concentrate their investments in a particular industry or sector, such as technology, healthcare, or energy. These funds allow investors to capitalize on specific sectoral trends or opportunities. Sector-specific funds provide targeted exposure, but they can also be more volatile as they are influenced by industry-specific factors.
Mutual funds are a strong and reliable choice for an investor who is looking to earn profits by staying within the safe circle. Mutual funds offer low risks as compared to individual investments, which he does. Different types of mutual funds have their own pros and cons, and an investor should properly research which type of mutual funds suits him best. all mutual funds in India and their types are discussed in the content above.
How Many Types of Mutual Funds in India – FAQs
A mutual fund is what?
Ans. A sort of investing tool known as a mutual fund gathers money from many different investors and invests it in a range of securities, such as stocks, bonds, or both. It is managed by competent investment managers. If you wish to know how many types of mutual funds in India, read the article above.
How do I choose the right mutual fund among how many types of mutual funds in India?
Ans. When choosing a mutual fund among all mutual funds in India, consider factors such as your investment goals, risk tolerance, time horizon, and expense ratios. It’s also important to assess the fund’s performance track record and the expertise of the fund manager.
What are the risks associated with all mutual funds in India?
Ans. Mutual funds come with risks, including market volatility, fluctuations in asset prices, and the potential for loss of principal. The level of risk varies depending on the type of fund, such as equity funds being riskier than debt funds.
Can I redeem my mutual fund investment anytime?
Ans. Investors can always sell their shares of open-end mutual fund investments. Closed-end funds and interval funds have specific redemption periods, and investors can sell their units during those periods or on the secondary market for closed-end funds.
Are all mutual funds in India suitable for long-term investments?
Ans. Yes, mutual funds are often suitable for long-term investments as they provide the opportunity for capital appreciation and compounding returns. They can help individuals achieve financial goals such as retirement planning or funding education expenses.