Before knowing the types of mutual funds we
need to know what is Mutual funds.
A Mutual fund is a professionally managed type of
collective investment scheme that pools money from
many investors and invests it in
stocks, bonds, short-term money market instruments
and other securities.
It is said
“No matter what type of investor you are,
there is bound to be a mutual fund that fits your style”
Mutual Funds are divided into six
Diversified large cap funds
Fund of funds
It is a type of mutual fund in which a portfolio is
constructed to match or track the components of a
market index, such as the S&P CNX 500 or
CNX Midcap 100. They are the most riskiest funds
Index Funds invest in stocks comprising indices, such
as the Nifty 50.
There can be funds on other indices which have a large
number of stocks such as the CNX Midcap 100 or
S&P CNX 500.
Performance can be evaluated very easily.
It has low expense because transaction
cost is very low.
These are funds which restrict their stock selection to the
large cap stocks. It is generally perceived that large cap
stocks are those which have sound businesses, strong
management, globally competitive products and are quick to
respond to market dynamics.
It typically invest in the top 100 or 200 stocks
with highest market capitalization and liquidity.
Therefore, there for these funds are considered
as stable and safe.
The fund manager pores over data and
analyses market trends, takes into
government policies on different sectors and
then selects the stock to invest.
It has high expense.
A sector fund is a mutual fund that invests in a specific sector
of the economy, such as energy or utilities. Sector funds come
in many different flavors and can vary substantially in market
capitalization, investment objective and class of securities
within the portfolio.
It invests in:
Real Estate Funds
It is very diversified.
It do not permit investor to invest funds to invest over
10% of their Net Asset Value in a single company.
This is to ensure that schemes are diversified enough
and investors are not subjected to undue risk.
It is defined as a mutual fund, closed-end fund or exchangetraded fund that invests in companies located outside of the
investor's country of residence. Foreign funds offer individual
investors access to international markets. Investing abroad
poses risks, but can also help investors diversify their
Many mutual funds focus on manufacturing and production
stocks within precious metals, a few new ETF entries have
focused primarily on ownership of gold bullion. Gold is also
valuable as a bet against a falling currency.
Some funds invest in the indexes of mining companies,
others are tied directly to gold prices. For the average gold
investor, however, mutual funds and ETFs are now
generally the easiest and safest way to invest in gold.
Low cost and low minimum investment required
Diversification among different companies
Ease of ownership in a brokerage account or an IRA
Require no individual company research
In simple words it is a mutual fund that invests in other mutual
funds. Fund of funds allows investors to achieve a broad
diversification and an appropriate asset allocation with
investments in a variety of fund categories that are all
wrapped up into one fund. Fund of funds carries an operating
expense, investors are essentially paying double for an
expense that is already included in the expense figures of the