Skip to main content

Different schemes under Mutual Funds

When it comes to Mutual Funds there are different schemes or funds available for an investor to choose between. One can choose a particular type of fund based on his investing needs and risk profile. The schemes can be classified as :

Growth Funds : They promise pure capital appreciation with equity shares. They buy shares in companies with high potential for growth (some of which might not pay dividends). The Net Asset Value - NAV of such a fund will tend to be erratic, since these so-called growth shares experience high price volatility. They also make quick profits by investing in small cap shares and by investing in initial public. However, growth strategies may differ from one fund to another. Not all growth funds operate similarly.

Income Funds : They aim to provide safety of principal and regular (monthly, quarterly or semi annually) income by investing in bonds, corporate debentures and other fixed income instruments. The Asset Management Company(AMC) in this case will also be guided by ratings given to the issuer of debt by credit rating agencies. Wherever a debt instrument is not rated, specific approval of the board of the AMC is required. Since most of corporate debt is illiquid, the fund tries to provide liquidity by investing in debt of varying maturity.

Money Market Fund :
Also known as Liquid Plans, these funds are a play on volatility in interest rates. Most of their investment is in fixed-income instruments with maturity period of less than a year. Since they accept money even for a few days, they are best used to park short-term money, which otherwise earns a lower return in a savings bank account.

Gilt Fund : They generate returns commensurate with zero credit risk, by investing securities created and issued by the central and/or the state government securities and/or other instruments permitted by the Reserve Bank of India. Since they ensure zero risk, instant liquidity, tax-free income, their return is lower than an income fund.

Balanced Fund :
The idea is to get the best of both worlds: equity shares and debt. Investing in equities is supposed to bring home capital appreciation, while that in fixed income is to impart stability and assure income for distribution. The proportion of the two asset classes depends on the fund managers' preference for risk against return. But because investments are highly diversified, investors reduce market risk. Normally about 50 to 65 per cent of a balanced fund’s funds are invested in equity shares.

Sector Fund :
The goal is once again pure capital appreciation, but the strategy is to buy into shares of only one industry. And not diversify like a growth fund. Such funds forgo the principle of asset allocation for high returns. That's why they are also the riskiest.

Tax Plan : Also known as Equity Linked Saving Schemes, they operate like any other growth fund (and that's why are as risky). However, an investor in these schemes gets an income-tax rebate of 20 per cent (for a maximum of Rs. 1 lakh) under section 80C.

Essentially, it is an incentive for the investor (who is otherwise investing in fixed-income instruments like the Public Provident Fund, National Savings Scheme, life insurance policies etc under the same section can also include tax saving mutual funds under the Income Tax laws) to participate in capital appreciation that can be delivered by investing in equity shares. That's also why these schemes also come with a three-year lock-in period. Also while other tax planning schemes guarantee returns, an ELSS offers no such assurance.

Index Fund :
Their goal is to match the performance of the markets. They do not involve stock picking by so called professional fund managers. An index fund essentially buys into the stock market in a way determined by some market index (BSE Sensex or S&P CNX Nifty) and does almost no further trading. Index funds are optimally diversified portfolios and only carry along with it the due to economy-wide factors.

But remember that the term 'growth' is often used in a very generic sense to denote every equity mutual fund. Also 'growth' in fixed income funds, comes from reinvesting dividends. That's why in such fixed income funds, investors have an option: they can choose either growth through reinvestment of dividends, or regular income by ticking on the income option. If you understand the types of funds, you should have a decent grasp on how funds invest their (our!) money.


  1. HI , your post is very informative and interesting. Mutual Fund is the best way to invest our money where we can get good returns. I have invested my money in “Mutual Fund” and i am very happy with the returns I get and the security they provide me.


  2. hi sushil, MFs are simpler way to invest in stocks. carry on.
    rajesh n


Post a Comment

Popular posts from this blog

Your Bill Amounts Are Going To Increase From June 1, 2016

Service tax is a tax levied by the government on service providers on certain service transactions, but is actually borne by the customers. It is categorized under Indirect Tax and came into existence under the Finance Act, 1994. Union Finance Minister, Arun Jaitley, in his budget announcements proposed to impose a cess, called the Krishi Kalyan Cess, @ 0.5% on all taxable services. The present rate of service tax will be hiked to 15 per cent from June 1, 2016, from 14.5 per cent. Take a look at what gets expensive:

Phone Bills: Your phone bills are going to go up. So, pay a good 15 per cent now on service tax on phone bills.

Restaurant Bills :If you are dining in a restaurant that already has service tax applicable, you are going to pay more on your eating out. Though 0.5 per cent on a single bill may not mean much, frequent diners may end-up paying a lot during the year.

Travelling: You will have to pay more for air travel, as there is a service tax on tour operators and travel agents.

What is Gold ETF - Gold Bees, Reliance Gold,Kotak Gold

What is Gold Bees or Gold ETF?

Gold ETFs are open-ended mutual fund schemes that will invest the money collected from investors in standard gold bullion (0.995 purity). The investors' holding will be denoted in units, which will be listed on a stock exchange.They provide returns that would closely track the returns from physical gold in the spot market.

An investor can buy and redeem the units either directly from the mutual fund or from the stock exchange.Presently there are many Gold ETFs traded in NSE India. Some of the listed Gold ETFs are GoldBees,Reliance Gold,Kotak Gold,UTI Goldshare

Why choose Gold?
Gold holds its own in any investment evaluation on its strengths as a hedge against inflation, value in the event of political uncertainties and its traditionally negative co-relation with other asset classes such as stocks, fixed income securities and commodities.

The value of goods and services that gold can buy has remained stable unlike currencies that have seen significant…


NIFTY BEES - is the first ETF (Exchange Traded Fund) in India, which seeks to provide investment returns that closely correspond to the total returns of securities as represented by the S&P CNX Nifty Index. It gives you the most diversified exposure at lowest possible unit size. Approximately value of Nifty bees will be 1/10th value of the prevailing Nifty price.

ETFs are one of the latest financial innovations and any new concept takes time to be known widely. Globally it took more then five to seven years before it could be of any significant size. In India, it was introduced with Rs 21 crore in size , a fraction of the mutual fund industry, it has come far with more than Rs 700 crore in size with six ETFs.

The Nifty BeES also scores over other index funds due to its low tracking error and expense ratio, apart from easier tradeability as it is listed in the NSE. One can also consider doing an SIP in Nifty BeES.

Some of the reasons to invest in Nifty Bees : Investing in Exchange …