Mutual funds types are been divided into 3 categories they are 1. By structure 2.Asset class 3.By Investment objective.
1.By Structure:- Technical mutual funds are of 4 basic types in a company for the investments. Closed-end funds, exchange-traded funds, and unit investment trusts are the three
- Close-End fund:- Close-End funds are a bit similar to the open-End funds in that their assets are invested in a wide range of securities. The difference between Close-End funds behaves more like a stock whereas on the other hand open-end mutual fund continually issues new shares to investors.
- Open-End funds:-Mutual fund is having an open-End structure because cash flow door—both into and out of the fund is always available. Simply, the company assures the new investors and continue and the company offers new to share with investors. when a person invests in a mutual fund the money is direct into account and the profit of the shares are created and issued to that person. The person will hold this investment in an account when the breakage of the firm from the partnership or at the fund company
- Interval Fund:- Its is the non-traditional type of closed-end mutual fund that periodically offers to buy back a percentage of outstanding shares from shareholders and they are not required to sell their shares back to the fund
2. By Asset Class:- It was similar to financial characteristics that exhibit similar characteristics and are subject to the same laws and regulations. Equities (stocks), fixed income (bonds), cash and cash equivalents, real estate, commodities, futures, and other financial assets.
- Equity Fund:- It is also known as stock fund they are principally categorized according to company size equity fund is a mutual fund that invests principally in stocks
- Debt Fund:- It is a Mutual Friendly deal. They are mutual funds that invest in fixed income securities like bonds and treasury bills. Gilt fund, monthly income plans, short term plans, liquid funds, and fixed maturity plans. debt fund is a fund that invests in bonds. Bond funds typically pay periodic dividends that include interest payments on the fund’s underlying securities plus periodic realized capital
- Hybrid Fund:- It is also known as Balanced Funds or asset allocation funds this is mutual funds that provide a combination of more than one underlying investment assets class, such as stocks, bonds or cash.
- Money Market Fund:- It is also one kind of mutual fund that invest high liquid Instruments such as cash equivalent securities, and high credit rating debt-based securities with a short-term, maturity less than 13 months. A money market fund is an open-ended mutual fund that invests in short-term debt securities. The major goal of maintaining a highly stable asset value through liquid investments.
3.BY Investment Objective:- An investment objective is a set of goals an investor has for their portfolio. It is used for an advisor to determine the optimal strategy for achieving the client’s goals. An investment objective is usually in the form of a questionnaire, and answers to the questions determine the client’s aversion to risk and how long the money is to be invested for time horizon here the client sets the goal or objective for the client’s portfolio.
- Diversified Funds:- This is an Investment Fund that holds across multiple market sectors it often in multiple asset classes. Its broad market diversification helps to prevent idiosyncratic events in one area from affecting an entire portfolio.
- Income Funds:- They are also known as mutual funds (Exchange Trade Fund)ETF. that emphasizes current income, either on a monthly or quarterly basis and they are opposed to capital gains or appreciation. Such funds usually hold a variety of government, municipal, and corporate debt obligations, preferred stock, money market instruments, and dividend-paying stocks. Income funds are often considered lower risk than funds that prioritize capital gains.
- Liquid Fund:- This belongs to Debt fund that invests in the short term plan with the fixed interest and it gains money marketing instrument. These can be treasury bills, commercial paper, and so on, which mature within 91 days.
- Equity Linked Saving Scheme (ELSS):- This is a Tax saving mutual fund scheme it helps investors to save taxes The investments in ELSS are subject to a lock-in period of 3 years and qualify for a tax deduction of up to Rs 1.5 lakh.