Irrespective of your investment goals, timeline, and investing style, there is a mutual fund that fits your specific requirements. Check out the common categories of mutual funds in India and pick the right one for your investment needs.
Mutual funds (MFs) are classified into several types, based on their investing styles, portfolios, risks and reward profiles. To choose the right mutual fund scheme that works for your investment goal, it’s important to understand the various types of funds.
The biggest benefit of a mutual fund investment is that – irrespective of your financial goal, you can find the right scheme for it. For instance, if you want to grow your wealth for a long-term objective like retirement, then equity funds are a good choice. On the other hand, if you want to supplement your regular income, then you may consider choosing a fixed income fund.
We take a look at different investment objectives and help you pick the right types of mutual funds for it.
Classification of Mutual Fund Schemes based on Investment Objectives:
- Equity Funds for Long-term Wealth Generation
If you wish to grow your corpus over a long-term, then equity funds are an excellent choice for you. The primary goal of growth funds is capital appreciation. Though a bit riskier compared to other funds, equity funds offer high-returns in the long-run. Investing in equity funds is a great way to save for large, long-term expenses like a child’s higher education, wedding and so on.
- ELSS Plans for Tax Saving
Did you know that you can enjoy tax savings by investing in ELSS (Equity Linked Savings Schemes)? You can avail tax-deductions up to 1.5 lakh INR per financial year under Section 80C of the ITA, by investing in tax-saving mutual fund schemes. ELSS plans come with a lock-in period of 3 years, and the majority of your money gets invested in equities.
- Fixed Income Funds for Regular Incomes
Fixed income funds invest in high-rated debts and other fixed income securities like debentures, corporate bonds, government security, and other common money market instruments. These funds are suited for investors who are looking to supplement their regular incomes with additional income. With fixed income funds, you can enjoy a regular and steady income. Compared to equity funds, fixed income funds are less risky
- Hybrid/Balanced Funds for Retirement Planning
As the name implies, hybrid funds invest in a mixture of equities and debt instruments. Your equity investment helps to grow your wealth, while the debt instruments balance the risk. There are special mutual funds solely for retirement planning, known as pension funds. In pension funds, you can withdraw the sum as regular pension, lump sum after retirement, or a combination of both, depending on your specific requirements.
- Debt Funds for Fixed Savings
Debt funds invest in corporate bonds, government securities, and other debt instruments. Compared to equity funds, debt funds are less volatile and more stable. This means you can enjoy returns without significant risks. If you are looking to build a steady corpus, free from market fluctuations, then debt funds are a great choice.
Mutual Funds for all Investors and Investment Needs
Investing in mutual fund schemes is a great way to meet all your investment needs. Consider your specific investment goals and then choose the right fund that meets your requirements.
