Debt Funds

  • Debt Mutual Funds – Debt mutual funds invest in various fixed income instruments like bank Certificates of Deposits (CDs), Commercial Papers (CPs), treasury bills, government bonds (G-secs), PSU bonds and corporate bonds/debentures, cash and call instruments, and so on.
    They invest their corpus in securities issued by the government. These funds carry zero default risk but are associated with interest rate risk. But these schemes are safer as they invest in papers backed by government.
    They invest a major portion in various debt instruments such as bonds, corporate debentures and government securities.
    They invest most of their corpus in debt instruments and minimum in equities. They get the benefits of both equity and debt market. These schemes ranks slightly high on the risk-return matrix. These try to give you a monthly income in the form of dividends, which is of course not guaranteed. These funds are for investors, who have a big corpus initially, and would like to generate a monthly income for themselves with low to moderate risk.
    These funds are for those with an investment horizon of 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.
    Also known as money market schemes. These 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 and are meant for an investment horizon of one day to three months.


Equity Funds

These funds invest in shares of companies that are listed on the stock exchanges.

  • Tax Saving Funds – As the name suggests, this scheme offers tax benefits to its investors. The funds are invested in equities thereby offering long-term growth opportunities. Tax saving mutual funds (called Equity Linked Savings Schemes) has a 3-year lock-in period.
  • Balanced Fund – This scheme allows investors to enjoy growth and income at regular intervals. Funds are invested in both equities and fixed income securities; the proportion is pre-determined and disclosed in the scheme related offer document. These are ideal for the cautiously aggressive investors.
  • Large-cap fund: Large-cap funds are, typically, the least risky funds. These companies are among the least volatile companies as they are mostly in mature businesses.
  • Mid-cap & small-cap fund: These funds are riskier than large-cap funds. They invest in small-sized companies that are in their growing stages. Since these companies are in their growing stages, they can get volatile in an uncertain market. These are high-risk companies; they typically rise more than large-cap funds in rising markets, but fall more than large-cap companies in falling markets.
  • Sector/Thematic fund: While sector funds invest in one or two sectors, thematic funds invest in a bunch of sectors that are woven by a common theme, such as infrastructure, consumer spending, fast-moving consumer goods and so on. These are the riskiest of all types of funds as their portfolios are typically very concentrated.
  • Index Fund – Index schemes is a widely popular concept in the west. These follow a passive investment strategy where your investments replicate the movements of benchmark indices like Nifty, Sensex, etc.

Gold Funds

Gold Exchange Traded Funds track the price of gold and are traded in stock markets. IDBI Gold ETF, SBI Gold ETF and Birla Sun Life Gold ETF are a few examples of Indian Gold ETF trading in stock exchanges. This method eliminates the need to physically hold gold.

Gold Mutual Funds (Funds of Funds) These are open ended scheme which invest in units of Gold Exchange Traded funds on behalf of the investor. As the name suggests it a fund investing in funds and one does not need to open a demat account as is required in gold ETFs.

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