Equity Mutual Fund Scheme:
These schemes invest directly in stocks. These schemes can give superior returns but can be risky in the short-term as their fortunes depend on how the stock market performs. Investors should look for a longer investment horizon of at least five to 10 years to invest in these schemes. There are 10 different types of equity schemes.
Debt Mutual Fund Schemes:
These schemes invest in debt securities. Investors should opt for debt schemes to achieve their short-term goals that are below five years. These schemes are safer than equity schemes and provide modest returns. There are 16 sub-categories under the debt mutual fund category.
Hybrid Mutual Fund Schemes:
These schemes invest in a mix of equity and debt, and an investor must pick a scheme based on his risk appetite. Based on their allocation and investing style, hybrid schemes are categorized into six types.
Solution-Oriented Schemes:
These schemes are devised for particular solutions or goals like retirement and child’s education. These schemes have a mandatory lock-in period of five years.
Mutual Fund Charges:
The total expenses incurred by your mutual fund scheme are collectively called expense ratio. The expense ratio measures the per unit cost of managing a fund. The expense ratio is generally in between 1.5-2.5 per cent of the average weekly net assets of the schemes.
Mutual Fund Objectives
To invest in a Mutual Fund, you need to understand the types of Mutual Funds that are available to you. These include:
Equity: These are funds that invest exclusively in the stocks of domestic companies listed on stock exchanges. These are categorised as high-risk funds.
Money market: These are mainly meant for investors looking for easy liquidity and returns in the short-term. These funds invest in money market instruments such as Treasury bills (T-Bills), Commercial Papers (CPs), Repurchase Agreements (Repo) and government securities. These are categorized as low-risk funds.
Debt: These are funds that are considered as an alternative to Fixed Deposits. These funds invest in fixed-income securities. Debt funds are typically low-risk funds.
