Confused About Different Mutual Funds? Learn About Equity, Debt, and Hybrid Funds Here

Many of us have seen television advertising for mutual funds or heard about them from somebody who has invested in them. However, because there are so many various kinds of funds in the marketplace, some people find it challenging to navigate. A lot of people pool their money into mutual funds. A qualified fund manager oversees the management of this fund.

The funds are placed in securities such as stocks, money market instruments, and other investments such as bonds. Over the past few years, our country has seen an increase in retail investors in mutual funds. To locate the best fund for them, many novice investors have dove into the sea of funds. However, because there are so many options available, people frequently struggle to distinguish between mutual funds.

Different Types of Mutual Funds

1. Index Fund

This results in a portfolio that reflects an index of the market. The weights assigned to the securities within the portfolio match those in the index. The portfolio is not rebalanced depending on the fund manager’s assessment of the marketplace or a particular sector. Since index funds are maintained passively, their manager only sometimes makes small changes to keep the fund’s performance in line with the index. An index fund delivers the very same risk and returns as the index it monitors as a result.

2. Hybrid Scheme Funds

Bonds and equities are combined into balanced funds or popularly known as hybrid scheme funds, overcoming the divide between debt funds and equity funds. Hybrid funds are divided into the following 7 sub-sections by SEBI as Equity Savings, Arbitrage Fund, Multi-Asset Allocation Fund, Balanced Advantage Fund or Dynamic Asset Allocation, Aggressive Hybrid Fund, Balanced Hybrid Fund, or Conservative Hybrid Fund.

3. Debt Fund

A fund that predominantly specializes in bonds and other debt instruments is referred to as a debt fund (sometimes known as an income fund). Debt funds buy both long-term and short-term securities from public financial institutions, businesses, and governments. Certificates of deposit, commercial paper, debt obligations, government securities, treasury notes, and others are a few examples.

4. Equity Funds

Small-cap, Mid Cap, and Large Cap stocks are included in the scope of SEBI’s Equity Programs category. An equity plan invests mostly in stocks and other securities that are related to stocks. Although it aims for long-term prosperity, it could be unstable in the short to mid-term. For individuals with a greater appetite for risk and a longer investing horizon, this is appropriate.

5. Solution Oriented Schemes

These schemes are for children and retirees.

Retirement Fund	Lock-in for at least 5 years or until retirement age whenever is earlier
Children’s Fund	Lock-in for at least 5 years or until the child attains age of majority whichever is earlier
Index Funds/ETFs	Minimum 95% investment in securities of a particular index
Fund of Funds (Overseas/Domestic)	Minimum 95% investment in the underlying fund(s)