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Types of Schemes Your results on : Mutual Fund | Types of Schemes
Investing in mutual funds is done through the provision of different types of investing options that are made available to the investors. To invest in mutual fund one should know the various types of mutual funds available. These are: equity funds, debt funds, balanced schemes, sector funds, gilt funds, index funds, MIPs (Monthly Income Plans), MMFs (Money Market Funds) ETFs etc. Each scheme has its own investment strategy to invest. Most of the schemes have "growth oriented" or "dividend oriented" plans, which either re-invest or pay out the dividend collected from underlying stocks. In equity Schemes we invests in equity shares of companies which provides returns by way of capital appreciation. It involves a high risk so return may not be consistent. As it invests only in stocks, it is riskier than debt funds. The returns will depend on the performance of the company that the fund invests in. However, on the flipside, this fund has a high return capability since equities have historically outperformed all other asset classes.

  There are several types of Mutual funds based on following categories :
By Structure
  Open-Ended Schemes

An open-ended scheme is available for subscription all through the year. It does not have a fixed maturity. You can conveniently buy and sell units at Net Asset Value (NAV) related prices.The key feature of the Open-ended schemes is liquidity.
By Nature
  Equity Funds

These funds invest a maximum part of their corpus into equities holdings. The structure of the fund may vary different for different schemes and the fund manager’s outlook on different stocks. Equity investments are meant for a longer time horizon. The Equity Funds are sub-classified depending upon their investment objective, as follows:

 Diversified Equity Funds

 Mid-Cap Funds

 Sector Specific Funds

 Tax Savings Funds (ELSS)
By Investment Objective
  Income Schemes

Income Schemes, also known as debt schemes aims at providing regular and steady income to investors. These schemes generally invest in fixed income securities such as bonds and corporate debentures. Capital appreciation in such schemes may be limited.
  Tax-Saving Schemes

Tax-saving schemes offer tax rebates to the investors under tax laws prescribed from time to time. Under Sec.88 of the Income Tax Act, contributions made to any Equity Linked Savings Scheme (ELSS) are eligible for rebate.
By Structure
  Close-Ended Schemes

Close-end fund has a pre-specified maturity period. You can invest directly in the scheme at the time of the initial issue. After the initial offer period closes, there are two exit options available to an investor depending on the structure of the scheme.

Investors can transact (buy or sell) the units of the scheme on the stock exchanges where they are listed. On account of demand and supply situation, expectations of unit holder and other market factors, the market price at the stock exchanges could vary from the net asset value (NAV) of the scheme. Alternatively some close-ended schemes provide an additional option of selling the units directly to the Mutual Fund through periodic repurchase at the schemes NAV; however you can only sell units during the liquidity window. SEBI Regulations ensure that at least one of the two exit routes is provided to the investor.
By Nature
  Debt Funds

Debt fund aims to invest in debt papers. Government authorities, private companies, banks and financial institutions are some of the major issuers of debt papers. By investing in debt instruments, these funds ensure low risk and provide stable income to the investors. Debt funds are further classified as:

 Gilt Funds:
Invest their corpus in securities issued by Government, popularly known as Government of India debt papers. These Funds carry zero Default risk but are associated with Interest Rate risk. These schemes are safer as they invest in papers backed by Government.

 Income Funds:
Invest a major portion into various debt instruments such as bonds, corporate debentures and Government securities.

Invests maximum of their total corpus in debt instruments while they take minimum exposure in equities. It gets benefit of both equity and debt market. These scheme ranks slightly high on the risk-return matrix when compared with other debt schemes.

 Short term Plans (STPs):
Meant for investment horizon for three to six months. These funds primarily invest in short term papers like Certificate of Deposits (CDs) and Commercial Papers (CPs). Some portion of the corpus is also invested in corporate debentures.

 Liquid Funds:
Also known as Money Market Schemes, These funds provides easy liquidity and preservation of capital. These schemes invest in short-term instruments like Treasury Bills, inter-bank call money market, CPs and CDs. These funds are meant for short-term cash management of corporate houses and are meant for an investment horizon of 1day to 3 months. These schemes rank low on risk-return matrix and are considered to be the safest amongst all categories of mutual funds.
By Investment Objective
  Growth Schemes

Growth Schemes, also known as equity schemes aims at providing capital appreciation over medium to long term. These schemes normally invest a major part of their fund in equities and are willing to bear short-term decline in value for possible future appreciation.
  Index Schemes

Index schemes attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50. The portfolio of these schemes will consist of only those stocks that constitute the index. The percentage of each stock to the total holding will be identical to the stocks index weightage. And hence, the returns from such schemes would be more or less equivalent to those of the Index.
By Structure
  Interval Schemes

Interval Schemes combines the features of open-ended and close-ended schemes. The units may be traded on the stock exchange or may be open for sale or redemption during pre-determined intervals at NAV related prices.
By Nature
Balanced Funds

Balanced Funds invest in both equities and fixed income securities, which are in line with pre-defined investment objective of the scheme. The main objective is to provide investors with the best of both the worlds. Equity part provides growth and the debt part provides stability in returns.
By Investment Objective
  Balanced Schemes

Balanced Schemes as the name suggest aims at providing both growth and income by periodically distributing a part of the income and capital gains they earn. These schemes invest in both shares and fixed income securities, in the proportion indicated in their offer documents (normally 50:50).
  Sector Specific Schemes

These funds invest in the securities of only those sectors or industries as specified in the offer documents. e.g. Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds will depend on the performance of the respective sectors/industries. While these funds may give higher returns, they are more risky compared to diversified funds. Investors need to keep a watch on the performance of those sectors/industries and must exit at an appropriate time.
By Investment Objective
  Money Market Schemes

Money Market Schemes aims at providing easy liquidity, preservation of capital and moderate income to the investors. These schemes generally invest in safer, short-term instruments, such as treasury bills, certificates of deposit, commercial paper and inter-bank call money.
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