In the previous article we have discussed about mutual fund , and how to choose best mutual fund , but before investing your money you must have the knowledge of it.

  • what are the types of mutual funds ?
  • which category is better for you ?
  • where you can get maximum return ?
  • Are you invested your capital in a highly risky assets ?
  • Can you exit before the maturity ?

so we are going to discussed all about it, after reading this section you will be able to solve all your questions and you can take a good decision to find a good fund.

Basically we can categorize the mutual fund in three section – first is Equity fund , second is Hybrid fund and third is Debt fund.

Types of Mutual Funds

Types of Equity Funds

Equity fund are those funds which mainly invest in stock market. There are several types of  Equity funds- those are —

  • Large cap Fund
  • Mid cap Fund
  • Small cap fund
  • Sector fund
  • Diversified Equity Fund
  • ELSS
  • Dividend Yield Schemes
  • Thematic Fund

Now we come to these section one by one Large cap fund are those funds which mainly invest in large cap companies, these companies are basically divided by their market capitalization , the criteria of capitalization is not fixed its change time to time.

Few years ago the companies those market cap was above 50, 000 crores was under the large cap section, now the limit has changed and the criteria for large cap should be above 1 Lakh crore.

Those companies whose market cap is above 5000 crore and below 1 lakh crore are under mid cap companies and those companies whose market cap is less than 5000 crore are under small cap companies. So here we can say that mid cap fund invest in mid cap companies and small cap fund invest in small cap companies.

Large cap companies are also known as blue chip companies, they are the leaders in their sectors and they can easily survive in bad condition due to their strong financial strength. therefore they have low risk compare to mid cap and small cap companies.

Now we come to next type that is sector fund, as the name suggest these funds mainly invest in a particular sector like pharma, fmcg, media sector etc.

As the name suggest diversified fund invest in different sector and different companies either large cap or mid cap or small cap. their portfolio is a mix bag of different types of companies which belongs from different sectors.

Next is ELSS stands for Equity linked savings schemes, this is basically a tax saving fund, if you choose this fund then your investment will be locked for 3 years time period, before  the maturity you cannot exit from it, as it is a tax saving fund so here you can save up to 1.5 lakh in a financial year under Section 80C.

Next fund is Diversified fund these fund choose mainly those companies which are more stable , consistent , safe and low volatile and gives regular dividends to their investor. Dividend is a part profit  that is shared by  a company  to their investor , but it is not always necessary to give the dividend, company’s board member decides when and how much dividend should be pay to their investor.

Next is thematic fund , this type of fund invest in a particular theme like rural India theme, eCommerce theme , if we take an example HDFC housing opportunities  fund is a thematic fund which theme is housing, so it will invest in those companies which is related to housing like cement companies, paint companies, metal  companies, construction related companies etc.

Now we will discussed about two other types Debt fund and Hybrid Fund in upcoming articles.

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