What are the different types of mutual funds?
The Securities and Exchange Board of India (SEBI) has classified mutual funds into five main categories based on their investment instruments:
- Equity Schemes: These funds primarily invest in equity and equity-related instruments. SEBI has defined subcategories such as Large Cap, Mid Cap, Small Cap, Multi Cap, and Sectoral/Thematic funds.
- Debt Schemes: These funds focus on investments in fixed-income securities like bonds and treasury bills. Subcategories include Overnight Funds, Liquid Funds, and Corporate Bond Funds, among others.
- Hybrid Schemes: These funds invest in a mix of equity and debt instruments. Examples are Aggressive Hybrid Funds and Balanced Advantage Funds.
- Solution-Oriented Schemes: Designed to meet specific financial goals, these include Retirement Funds and Children's Funds, typically with a lock-in period.
- Other Schemes: This category comprises Index Funds, Exchange-Traded Funds (ETFs), and Fund of Funds, which invest in other mutual funds.
This classification helps investors choose mutual funds aligned with their financial objectives and risk tolerance.
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