Pages

Wednesday, November 9, 2011

Different Types of Mutual Funds Available for Investors in India


The Indian Mutual Fund Market is one of the largest MF Markets in the world and investors world-over invest in our top MF Plans. Mutual Funds in India are diverse and as an investor, there is a wide array of investment options available. This post is about the various categories of Mutual Funds that are available for us to invest.

Why Mutual Funds?

Mutual Funds are a boon to the investor who does not have the time or the know-how to identify and buy/sell securities themselves. There is a knowledgeable fund manager who is entrusted with this responsibility when we invest in their fund.

The below list is just an introductory post. To know more about Mutual Funds – you can view the below posts.

What is a Mutual Fund
Types of Equity Mutual Funds
Debt Mutual Funds
Monthly Income Plans
Contra Mutual Funds

The Different Mutual Fund Categories in India are:

1. Equity Diversified Funds
2. Equity Midcap Funds
3. Equity Infrastructure Funds
4. Equity Banking Funds
5. Equity Pharma Funds
6. Equity FMCG Funds
7. Equity Technology Funds (IT)
8. Arbitrage Funds
9. Equity Index Funds
10. Balanced Funds
11. Monthly Income Plans
12. Debt Funds
13. Liquid Funds
14. Income Funds
15. GILT Funds
16. Gold ETFs
17. Fund of Funds – Equity Oriented
18. Fund of Funds – Debt Oriented


What are these Different Categories?

Equity Diversified Funds


These are the most common types of Mutual Funds. They invest upto 100% of their Assets into Stocks and other Equity Market instruments. They invest predominantly in Large-cap and Blue-chip stocks. Their returns depend on the overall stockmarket performance and the stock selection of the Fund Manager.

Example:

a. HDFC Top 200
b. HDFC Equity
c. ICICI Prudential Focused Blue-chip Equity
d. Fidelity Equity
e. Etc

2. Equity Midcap Funds

These are Mutual Funds that invest in companies that fall under the Small & Midcap category. They usually search for small to medium sized companies with good fundamentals and growth potential and invest in them.

Example:

a. DSP Blackrock Small & Midcap Fund
b. HDFC Midcap Opportunities Fund
c. IDFC Premier Equity
d. ICICI Prudential Discovery Fund
e. etc

2. Equity Infrastructure Funds

These are Mutual Funds that invest in stocks of Infrastructure Companies in India.

Example:

a. Birla Sunlife Infrastructure
b. Canara Rebecco Infrastructure
c. ICICI Prudential Infrastructure
d. etc

3. Equity Banking Funds

These are Mutual Funds that Invest in stocks of Banks and other financial companies.

Example:

a. ICICI Prudential Banking & Financial Services Fund
b. Reliance Banking Fund
c. UTI Thematic – Banking Sector Fund
d. etc

4. Equity Pharma Funds

These are Mutual Funds that invest in Stocks of Pharmaceutical & Healthcare companies.

Example:

a. Reliance Pharma Fund
b. SBI Magnum Pharma Fund
c. UTI Pharma & Health
d. etc

5. Equity FMCG Funds

These are Mutual Funds that invest in Stocks of the Fast Moving Consumer Goods (FMCG) companies.

Example:

a. SBI Magnum Sector Umbrella – FMCG Fund
b. ICICI Prudential FMCG Fund
c. etc

6. Equity Technology Funds

These are Mutual Funds that invest in Stocks of Information Technology Companies.

a. SBI Magnum IT Fund
b. Franklin Infotech Fund
c. ICICI Prudential Tech. Fund
d. etc

7. Arbitrage Funds

These are Mutual Funds that invest in Arbitrage Opportunities.

Note: Arbitrage Opportunities are a special class of investment where the fund manager tries to make a profit out of the pricing mismatch between the Equity and Derivatives Market. It is a separate topic in itself and will probably be covered in a later article.

Example:

a. ICICI Prudential Equity and Derivatives Fund – Income Optimiser Plan
b. HDFC Arbitrage Fund – Retail
c. Kotak Equity Arbitrage Fund
d. etc

8. Equity Index Funds

These are Mutual Funds that invest in Stocks that comprise the Index they are tagged to and buy those stocks in the exact ratio that their weightage is in the respective index. For example, a Sensex Index fund will buy the 30 stocks that comprise the BSE Sensex in the exact ratio that these 30 stocks are given weightage by the Sensex.

Note: Since the BSE(Sensex) and NSE(Nifty) are the two prominent exchanges in India, most Equity Index funds tag themselves to either of these two indices.

Example:

a. HDFC Index Fund – Sensex
b. Reliance Index Fund – Sensex
c. IDFC Nifty Fund
d. HDFC Index Fund – Nifty
e. ICICI Prudential Index Fund – Nifty
f. Reliance Index Fund – Nifty
g. etc

9. Balanced Funds

These are mutual funds that invest in both the Stock Market as well as Debt (Fixed Income) Instruments. Stock Market investments do not exceed 65% of the total assets. The presence of 35% or more of Fixed Income Instruments gives it much more stability than the regular Equity funds. The returns from these funds are comparatively lesser than the Equity Oriented Funds. However, during turbulent times, Balanced Funds are much sought after and often post much lesser losses than Equity Funds.

Example:

a. HDFC Prudence Fund
b. HDFC Balanced Fund
c. Birla Sun Life 95 Fund
d. DSP Blackrock Balanced Fund
e. etc

10. Monthly Income Plans

These are Mutual Funds that invest in Fixed Income (Debt) Instruments and aim at providing a regular income/cash-flow to the investor. Usually a lump-sum investment is received from the investor and dividends are paid out regularly to the investors.

Example:

a. HDFC Monthly Income Plan – LTP
b. Reliance Monthly Income Plan
c. Birla Sun Life MIP II – Savings 5 Plan
d. etc

11. Debt Funds

These are Mutual Funds that invest in Fixed Income (Debt) Instruments and aim at preserving the capital invested in them. Depending on whether they are Long-Term or Short-Term the fund manager would invest in debt securities that are either long or short term. Usually the returns in Long Term funds are marginally higher than Short Term funds.

Example:

a. Long Term
i. Birla Sun Life Income Fund
ii. BNP Paribas Bond Fund
iii. ICICI Prudential Long Term Fund
iv. etc

b. Short Term
i. UTI Short Term Income
ii. BNP Paribas Short Term Income
iii. TATA Short Term Bond Fund
iv. etc

12. Liquid Funds

These are Mutual Funds that invest in Debt Instruments with the aim of preserving the liquidity of the investment. The main aim here is to make money available to the investor anytime he/she wants and at the same time, try to generate decent returns for them. They usually invest in very short term debt securities.

Example:

a. Birla Sun Life Cash Manager
b. DSP Blackrock Liquidity Fund
c. HDFC Liquid Fund
d. etc

13. Income Funds

These are Mutual Funds that invest in Fixed Income (Debt) Instruments and aim at providing income/cash-flow to the investor. Unlike MIP’s there is no fixed monthly/regular payments. Instead, the fund house will share profits/dividends as and when possible.

These funds too are classified based on the timeframe of the debt securities they invest in and are categorized as Ultra short term, short term and long term funds.

Example:

a. Ultra short Term
i. HDFC Cash Management Fund – Treasury Advt.
ii. ICICI Prudential Flexible Income Plan
iii. Reliance Money Manager Fund - Retail
iv. Etc

b. Short Term
i. Birla Sun Life Dynamic Bond Fund
ii. HDFC High Interest Fund – Short Term Plan
iii. ICICI Prudential Short Term Plan
iv. etc

c. Long Term
i. BNP Paribas Flexi Debt Fund
ii. HDFC High Interest Fund
iii. ICICI Prudential Income Plan
iv. Reliance Income Fund
v. etc

14. GILT Funds

These are Mutual Funds that invest exclusively in Government Securities like Government of India Bonds, RBI Bonds etc.

Example:

a. Birla Sun Life GILT Plus – Regular Plan
b. ICICI Prudential Gilt – Investment – PF Option
c. etc

15. Gold ETFs

Gold ETF’s are funds that invest in gold. Each unit of a gold ETF is equivalent to either 0.5 or 1 gram of pure 24 carat physical gold.

Example:

a. Kotak Gold ETF
b. Quantum Gold ETF
c. Religare Gold ETF
d. Axis Gold ETF
e. etc

16. Fund of Funds – Equity Oriented

A Fund of Fund is a Mutual Fund where the fund manager does not buy individual stocks. Instead he buys mutual funds of a particular type. In this case, Equity Oriented Mutual Funds.

Example:

a. Quantum Equity FOF
b. Kotak Equity FOF
c. Principal Global Opportunities Fund
d. etc

17. Fund of Funds – Debt Oriented

A Fund of Fund is a Mutual Fund where the fund manager does not buy individual debt instruments. Instead he buys mutual funds of a particular type. In this case, Debt Oriented Mutual Funds.

Example:

a. IDFC All Seasons Bond
b. ICICI Prudential Advisor Series – Very Cautious Plan
c. etc


Disclaimer: The Mutual Funds named above are not investment advise. These are just examples of funds that fall under a particular category. Some of these funds are Top Rated and the best in their given class. They will be dealt with in separate posts!!!

Happy Investing in Mutual Funds!!!

No comments:

Post a Comment