Benefits of Mutual Funds

Professionally Managed

The fact that your money is managed by seasoned financial experts is one of the main advantages of participating in these funds.

Liquidity

Mutual funds have higher liquidity than other instruments because you can buy and sell them whenever you want.

Returns

Historically, mutual fund returns have outperformed other traditional investment options such as bank FDs, RDs, PPFs, and so on.

Affordability

You don't need a lot of money to start investing. You can start with just Rs. 500, a month.

Diversification

You can possess a diverse portfolio even with a small investment because mutual funds invest in a variety of securities, including stocks, bonds, and other assets. This helps to lower risk.

Well Regulated

The SEBI regulates mutual fund schemes. The stringent regulations ensure transparency and protect the interests of investors.

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Mutual Fund Types by Asset Class

Mutual funds in India are classified according to the asset class in which they invest. The following are some popular categories.

Large-Cap Fund

These funds invest at least 80% of their assets in the top 100 companies by market capitalization.

Mid-Cap Fund

These funds invest at least 65% of their assets in the next 150 (101st to 250th) companies ranked by market capitalization.

Small-Cap Fund

Such funds invest at least 65% of their assets in companies ranked 251 and above by market capitalization.

Multi-Cap Fund

These funds invest at least 25% of their assets in each of the large, mid, and small-cap stocks.

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Mutual Fund Types by Asset Class

Here are four common categories of debt mutual funds along with brief overview:

Liquid Fund

Invest in short maturity money market instruments (up to 91 days), offering high liquidity and minimal interest rate risk, suitable for short-term parking of funds.

Short Duration Fund

Invest in debt and money market instruments with maturities between 1 to 3 years, balancing moderate risk and return for investors with a medium-term horizon

Corporate Bond Fund

Primarily invest in high-rated corporate bonds, offering relatively higher returns than government securities but with some credit risk.

Gilt Fund

Invest exclusively in government securities with varying maturities, providing high safety but vulnerability to interest rate fluctuations.

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Mutual Fund Types by Asset Class

Here are four common categories of Hybrid Mutual Funds along with brief overview:

Aggressive Hybrid Fund

Invest 65–80% in equities and the rest in debt, aiming for long-term capital growth with higher risk and return potential.

Conservative Hybrid Fund

Allocate 75–90% to debt and 10–25% to equity, focusing on stable income with reduced risk for conservative investors.

Multi Asset Allocation Fund

Invest in at least three asset classes—usually equity, debt, and gold—with a minimum of 10% in each.

Dynamic Asset Allocation

Flexibly shifts between equity and debt (0–100%) based on market conditions or valuation models.

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