Wide variety of
Mutual Fund Schemes exist to cater to the needs such as financial position,
risk tolerance and return expectations etc. The table below gives an overview
into the existing types of schemes in the Industry.
TYPES
OF MUTUAL FUND SCHEMES
- By Structure
Open - Ended Schemes : These do not have a fixed maturity.You deal
with the Mutual Fund for your investments and redemptions.The key
feature is liquidity.You can conveniently buy and sell your units at Net
Asset Value (NAV) related prices, at any point of time.
Close - Ended Schemes : Schemes
that have a stipulated maturity period (ranging from 2 to 15 years) are
called close ended schemes. You can invest in the scheme at the time of
the initial issue and thereafter you can buy or sell the units of the
scheme on the stock exchanges where they are listed. The market price
at the stock exchange could vary from the scheme’s NAV on account of demand
and supply situation, unitholders’ expectations and other market factors.
One of the characteristics of the close-ended schemes is that they are generally traded
at a discount to NAV; but closer to maturity, the discount narrows.
Some
close-ended schemes give you an additional option of selling your units to
the Mutual Fund through periodic repurchase at NAV related prices.
SEBI Regulations ensure that at least one of the two exit routes
are provided to the investor under the close ended schemes.
Interval Schemes : These
combine the features of open-ended and close-ended schemes. They may be
traded on the stock exchange or may be open for sale or redemption
during predetermined intervals at NAV related prices.
- By Investment Objective
Growth Schemes : Aim to provide
capital appreciation over the medium to long term. These schemes
normally invest a majority of their funds in equities and are willing
to bear short term decline in value for possible future appreciation.
These schemes are not for investors seeking regular income or needing
their money back in the short term.
Income Schemes : Income Schemes Aim to provide regular and steady income
to investors. These schemes
generally invest in fixed income securities such as bonds and corporate
debentures. Capital appreciation in such schemes may be limited.
Ideal
for:
·
Retired people and others with a
need for capital stability and regular
income.
·
Investors who need some income
to supplement their earnings.
Balanced
Schemes : Aim to provide both growth and
income by periodically distributing a part of the income and capital
gains they earn. They invest in both shares and fixed income securities in
the proportion indicated in their offer documents. In a rising stock
market, the NAV of these schemes may not normally keep pace or fall
equally when the market falls.
Ideal for :
·
Investors looking for a combination
of income and moderate growth.
Money Market
Schemes : Aim to provide easy liquidity,
preservation of capital and moderate income. These schemes generally
invest in safer, short term instruments such as treasury bills,
certificates of deposit, commercial paper and interbank call money. Returns
on these schemes may fluctuate, depending upon the interest rates
prevailing in the market.
Ideal for:
Corporates and individual investors as a means to park
their surplus funds for short periods or awaiting a more
favourable investment alternative.
- Other Schemes
Tax Saving Schemes (Equity Linked
Saving Scheme - ELSS) : These
schemes offer tax incentives to the investors under tax laws as prescribed
from time to time and promote long term investments in equities
through Mutual Funds.Eligible for deduction under section 80C . Lock in period
three years
Ideal for:
Investors
seeking tax incentives.
Special Schemes
This
category includes index schemes that attempt to replicate the performance
of a particular index such as the BSE Sensex, the NSE 50 (NIFTY) or
sector specific schemes which invest in specific sectors such as Technology,
Infrastructure, Banking, Pharma etc.Besides, there are also schemes which
invest exclusively in certain segments of the capital market, such as
Large Caps, Mid Caps, Small Caps, Micro Caps, 'A' group shares,
shares issued through Initial Public Offerings (IPOs), etc.
- Index Schemes : Index
fund schemes are ideal for investors who are satisfied with a
return approximately equal to that of an index.
- Sector
Specfic Schemes : Sectoral
fund schemes are ideal for investors who have already decided to invest
in a particular sector or segment.
