As per SEBI Circular No. SEBI/HO/IMD/DF3/CIR/P/2017/114, Dt. October 6, 2017, the types of Mutual Funds in India are broadly categorised as under:
Equity Schemes – Equity Mutual Funds. Equity schemes endeavor to provide potential for high growth and returns with a moderate to high risk by investing in shares. Such schemes are either actively or passively (replicate indices) managed, and are best suited for investors with a long term investment horizon.
Debt Schemes – Debt Schemes are such in which investment is made 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.
Hybrid Schemes – Hybrid Funds invest in a mixture of debt & equity securities in different proportions based on the investment objective. A hybrid mutual fund scheme that invests over 65% of its corpus in equities and the remaining in debt is called an Equity-Oriented Hybrid Mutual Fund. Conversely, a hybrid mutual fund scheme that invests over 65% of its corpus in debt instruments and the remaining into equity is called a Debt-Oriented Hybrid Mutual Fund.
Solution Oriented Schemes – Solution Oriented Schemes or balanced schemes bridge the gap between equity and debt schemes. This category is characterized by a portfolio that is made up of a mix of equity stocks and bonds and will suit investors looking for debt plus returns with higher levels of risk than fixed income schemes. Solution oriented mutual funds are open ended schemes created mainly for long term planning.
Other Schemes – Those schemes which doesn’t fall under any of above categories would be placed under this category. E.g. exchange-traded fund (ETF), Index Funds etc.
The details of the scheme categories under each of the aforesaid groups are as under:
For further details of each type and sub category of funds, one can refer https://www.sebi.gov.in/legal/circulars/oct-2017/categorization-and-rationalization-of-mutual-fund-schemes_36199.html link.
We will cover advantages of Mutual Fund in our next blog…