Which are the Mutual Funds categories in India?
Various categories exists within equity, debt & hybrid funds. This article tries to divide each into sub category & attempt to simplify & weave everything by a single thread.
Major Categories of mutual funds –
Source - AMFI
So this is the major categorization of the mutual funds as per AMFI. The further sub-categorization & investment mandate under each category is described below –
1. Equity Mutual Funds –
Figure 1- Source AMFI
2. Debt Mutual Funds –
Figure 2 Source : AMFI
3. Hybrid Mutual Funds –
Figure 3 Source : AMFI
4. Solution Oriented Mutual Funds & others –
These are used to meet specific goals of an investor. The names of the schemes usually describes about the scheme.
Figure 4 Source : AMFI
So which funds are suitable to me?
The mutual fund industry has created many different options for investors in each category. To decide which fund to invest in, one should jot down one’s investment objectives, return expectation & risk ability. Then match the investor objectives with sub-category objective & look for the best Asset management company (Ex – HDFC AMC, Nippon AMC, PPFAS MF, etc.) in each sub category.
To simplify the above statement, let’s work with an example – one wants to save for children’s education abroad in US which is due in 15 years. So, 10 years is a longer time horizon & assuming one can take on higher risks of international equity, one can invest in Fund of Funds which invest in US markets via lump sum or SIP over the period. As the period of education comes closer, i.e. the child is due for abroad education in 1-3 years, one could move the fund into liquid funds where the volatility of funds is low. This is a hypothetical example, the real life situation will vary & this is where you Independent Financial Advisor role kicks into the picture.
So this is the brief overview of all categories available, the future articles will discuss each category of funds in detail with some shortlisted funds in each category.