An Equity Fund is a Mutual Fund Scheme that invests predominantly in shares/stocks of companies. They are also known as Growth Funds. Equity Funds are either Active or Passive.
In an Active Fund, a fund manager scans the market, conducts research on companies, examines performance and looks for the best stocks to invest.
In a Passive Fund, the fund manager builds a portfolio that mirrors a popular market index, say Sensex or Nifty Fifty.
Equity Funds can also be divided as per Market Capitalisation, i.e., how much the capital market values an entire company’s equity. There can be Large Cap, Mid Cap, Small or MicroCap Funds.
A debt fund is a mutual fund scheme that invests in fixed income instruments, such as Corporate and Government Bonds, corporate debt securities, and money market instruments etc. that offer capital appreciation.
Debt funds are also referred to as Income Funds or Bond Funds
A Liquid Mutual Fund is a debt fund which invests in fixed-income instruments like commercial paper, government securities, treasury bills, etc. with a maturity of up to 91 days. investors can get their withdrawals processed within 24 hours.
These funds carry the lowest interest-rate risk in the debt funds category. The core objective of a liquid fund is providing capital protection and liquidity to the investors. Therefore, the fund manager selects high-quality debt securities and invests according to the scheme’s mandate.
The fund manager ensures that the average maturity of the portfolio is not more than 91 days. Shorter maturity makes the fund less prone to change in interest rates.
By matching the maturity of individual securities with the maturity of the portfolio, the fund manager tries to deliver better returns. Liquid funds are known to offer better returns than a regular savings account.
Hybrid Funds are mutual fund schemes which invest in more than one asset class i.e. equity, debt and other asset classes depending on the investment objective of the scheme.
These funds invest in a mix of different asset classes to diversify the portfolio with an aim to minimize the risk involved.
An ELSS fund or an equity-linked savings scheme is the only kind of mutual funds eligible for tax deductions under the provisions of Section 80C of the Income Tax Act, 1961.
ELSS mutual funds’ asset allocation is mostly (65% of the portfolio) made towards equity and equity-linked securities such as listed shares. They may have some exposure to fixed-income securities as well.
These funds come with a lock-in period of just three years.
Interval Funds can invest in equity or debt instruments or both. The units of these funds can be purchased and/or redeemed only during specific time intervals.
They are like closed-ended funds where you cannot purchase/redeem units frequently.
The fund house declares these intervals wherein the investors can sell/buy units. The fund house determines the intervals.
Index funds are investments that follow an index. Their main goal is to make a portfolio that looks like an index of the stock market.
A fund that tracks an index holds the same stocks in the same amounts as the index in other words replicates the index. Indian index funds are based on gold, Nifty, Midcap index, etc.
These funds invest in companies that are related to the specific theme, in order to capitalize on growth opportunities and generate returns for investors.
Thematic funds are managed by investment professionals who have expertise in a specific theme or trend.
An ETF, or exchange traded fund, is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. In the simple terms, ETFs are funds that track indexes such as CNX Nifty or BSE Sensex, etc.
As the name suggests these funds are traded on the stock exchange.
A 'Fund of Funds' (FOF) is an investment strategy of holding a portfolio of other investment funds rather than investing directly in stocks, bonds or other securities.
An FOF Scheme primarily invests in the units of another Mutual Fund scheme.
This type of investing is often referred to as multi-manager investment.
