Types of Mutual Fund

All financial calculator

Mutual funds may be classified into different categories on the basis of:

Tenor

Tenor refers to the ‘time’. Mutual funds can be classified on the basis of time as under:

1. Open Ended funds
These assets are accessible for membership consistently along with top mutual funds analysis. These assets don’t have an altered development. Financial specialists have the adaptability to purchase or offer any piece of their venture whenever, at the common value (Net Asset Value – NAV) around then.

2. Close Ended funds
These assets start with an altered corpus and work for a settled span. These assets are open for membership just amid a predetermined period. At the point when the period ends and mutual funds analysis is done, financial specialists can reclaim their units at the predominant NAV.

Asset Classes

1. Equity funds
These assets put resources into shares. These assets may put cash in development stocks, force stocks, esteem stocks or wage stocks relying upon the speculation target of the store.

2. Debt funds or Income funds
These assets put cash in securities and currency showcase instruments. These assets may put into long haul and/or fleeting development bonds.

3. Hybrid funds
These assets put resources into a blend of both value and obligation. With a specific end goal to hold their value status for assessment purposes, they by and large contribute no less than 65% of their benefits in values and approximately 35% in the red instruments, coming up short which they will be delegated obligation situated plans and be burdened as needs be. Month to month Income Plans (MIPs) falls inside the classification of half-breed stores. MIPs put up to 25% into values and adjust into an obligation.

4. Real asset funds
These assets put resources into physical resources, for example, gold, platinum, silver, oil, items and land. Gold Exchange Traded Funds (ETFs) and Real Estate Investment Trusts (REITs) fall inside the class of genuine resource stores.

Investment Philosophy

1. Diversified Equity Funds
These assets expand the value part of their Asset Under Management (AUM), crosswise over different segments. Such subsidies abstain from taking sectoral wages i.e. contributing a greater amount of their advantages towards a specific segment, for example, oil and gas, development, metals and so on. In this way, they utilize the enhancement system to diminish their general portfolio hazard.

2. Sector Funds
These assets are relied upon to put transcendently in a particular segment. Case in point, a managing an account reserve will put just in saving money stocks. For the most part, such subsidies put 65% of their aggregate resources in a particular division.

3. Index Funds
These funds seek to have a position which replicates the index, say BSE Sensex or NSE Nifty. They maintain an investment portfolio that replicates the composition of the chosen index, thus following a passive style of investing.

4. Exchange Traded Funds (ETFs)
These funds are open-ended funds which are traded on the exchange (BSE / NSE). These funds are benchmarked against the stock exchange index. For example, funds traded on the NSE are benchmarked against the Nifty. Unlike an index fund where the units are traded at the day’s NAV, in ETFs (since they are traded on the exchange) the price keeps on changing during the trading hours of the exchange. If you as an investor want to buy or sell ETF units, you can do so by placing orders with your broker, who will in-turn offer a two-way real time quote at all times. The AMC does not offer sale and re-purchase for the units. Today, ETFs are available for pre-specified indices. Gold ETFs are available for investment, however silver ETFs are not yet available.

5. Fund of Funds (FOF)
These funds invest their money in other funds of the same mutual fund house or other mutual fund houses. They are not allowed to invest in any other FOF and they are not entitled to invest their assets other than in top mutual fund analysis schemes/funds, except to such an extent where the fund requires liquidity to meet its redemption requirements, as disclosed in the offer document of the FOF scheme.

6. Fixed Maturity Plan (FMP)
These funds are basically income/debt schemes like Bonds, Debentures and Money market instruments. They give a fixed return over a period of time. FMPs are similar to close ended schemes which are open only for a fixed period of time during the initial offer. However, unlike closed ended schemes where your money is locked for a particular period, FMPs give you an option to exit. Remember though, that this is subject to an exit load as per the funds regulations. FMPs, if listed on the exchange, provide you with an opportunity to liquidate by selling your units at the prevailing price on the exchange. FMPs are launched in the form of series, having different maturity profiles. The maturity period varies from 3 months to one year.

7. Dividend
A dividend is allocated as a fixed amount per unit, with unitholders receiving a dividend in proportion to their holding. The dividends declared or paid shall also be mentioned in Rupees per unit along with the face value of each unit of that scheme and the prevailing NAV at the time of declaration of the dividend.

Dividends are payments made by an AMC to its unit holders. It is the portion of profits paid out to these investors. All the profits earned (based on accrual of income and expenses as detailed above) are treated as available for distribution.

Geographic Regions

1. Country or Region Funds
These funds invest in securities (equity and/or debt) of a specific country or region with an underlying belief that the chosen country or region is expected to deliver superior performance, which in turn will be favourable for the securities of that country. The returns on country fund are affected not only by the performance of the market where they are invested, but also by changes in the currency exchange rates.

2. Offshore Funds
These funds mobilise money from investors for the purpose of investment within as well as outside their home country. so we have seen that funds can be categorised based on tenor, investment philosophy, asset class, or geographic region. Now, let’s get down to simplifying some jargon with the help of a few definitions, before getting into understanding the nitty-gritty of investing in top mutual funds analysis.