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What are the different types of mutual funds in India?

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What are the different types of mutual funds in India?

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There are so many different types of mutual funds in the market right now — it can be a little daunting. But, the truth is, they are one of the most trending forms of investment options today. I like to call them the friendly neighbourhood investing instruments as they are relatively secure and offer returns to investors with minimal risks. Besides, mutual funds are periodically regulated and monitored by SEBI in India. 

Each individual invests in mutual funds with a different purpose and goal, and to cater to these individuals, there are various classes of mutual funds. They are broadly divided based on structures, asset class, investment objectives, speciality and risks.

Here’s a table that contains essential information on all the different categories and types of mutual funds with examples — that you can invest in today: 

So, which fund suits you?

While there is an array of funds at your disposal, choosing which funds to invest in will only make sense if you’re clear on your end goal. This will make sure that you opt for a fund that meets your needs and delivers liquidity when you need it the most. It’s recommended that you carefully check out the types of mutual funds with examples, read the fine print for each of them and take the help of financial experts before finalising.

Frequently Asked Questions

1. What are the types of mutual funds?

Mutual funds are a professionally managed portfolio of stocks. As the name implies, cash from many investors gets pooled into it. Money managers, regulated by the Government, place the investments in a selection of stocks and bonds. Their goal? Try & make this fund profitable over time. They are broadly divided based on structures, asset class, investment objectives, speciality and risks.

2. Which type of mutual fund is best and why?

There’s no clear-cut ‘best mutual fund’. Anyone who claims that is duping you. Each individual’s investment needs vary. Some are in it for the long run, and others have high-risk appetites. Invests in mutual funds after setting clear goals; once that’s done, you will find various classes of mutual funds to choose from. It’s recommended that you carefully read every fund’s scheme document, understand the fine print for each and take a well-informed decision before placing your money in it.

3. What is the safest mutual fund?

When it comes to playing it safe, your best bet is on Debt funds. Debt funds invest in safe bonds where payback is consistent — less risky than equity. Compared to other types, it is one of the most secure mutual funds. Debt is a way for companies/governments to raise money; your investment is a loan to them. These (usually) creditworthy borrowers typically return the cash in monthly/yearly interest payments & a principal payout. Besides, these funds don’t have a definite tax deduction, so the investor is liable to pay tax on the interest earned if it surpasses ₹10,000. 

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