Skip to main content

Different schemes under Mutual Funds

When it comes to Mutual Funds there are different schemes or funds available for an investor to choose between. One can choose a particular type of fund based on his investing needs and risk profile. The schemes can be classified as:

Growth Funds : They promise pure capital appreciation with equity shares. They buy shares in companies with high potential for growth (some of which might not pay dividends). The Net Asset Value - NAV of such a fund will tend to be erratic, since these so-called growth shares experience high price volatility. They also make quick profits by investing in small cap shares and by investing in initial public. However, growth strategies may differ from one fund to another. Not all growth funds operate similarly.

Income Funds : They aim to provide safety of principal and regular (monthly, quarterly or semi annually) income by investing in bonds, corporate debentures and other fixed income instruments. The Asset Management Company(AMC) in this case will also be guided by ratings given to the issuer of debt by credit rating agencies. Wherever a debt instrument is not rated, specific approval of the board of the AMC is required. Since most of corporate debt is illiquid, the fund tries to provide liquidity by investing in debt of varying maturity.

Money Market Fund :
Also known as Liquid Plans, these funds are a play on volatility in interest rates. Most of their investment is in fixed-income instruments with maturity period of less than a year. Since they accept money even for a few days, they are best used to park short-term money, which otherwise earns a lower return in a savings bank account.

Gilt Fund : They generate returns commensurate with zero credit risk, by investing securities created and issued by the central and/or the state government securities and/or other instruments permitted by the Reserve Bank of India. Since they ensure zero risk, instant liquidity, tax-free income, their return is lower than an income fund.

Balanced Fund :
The idea is to get the best of both worlds: equity shares and debt. Investing in equities is supposed to bring home capital appreciation, while that in fixed income is to impart stability and assure income for distribution. The proportion of the two asset classes depends on the fund managers' preference for risk against return. But because investments are highly diversified, investors reduce market risk. Normally about 50 to 65 per cent of a balanced fund's funds are invested in equity shares.

Sector Fund :
The goal is once again pure capital appreciation, but the strategy is to buy into shares of only one industry. And not diversify like a growth fund. Such funds forgo the principle of asset allocation for high returns. That's why they are also the riskiest.

Tax Plan : Also known as Equity Linked Saving Schemes, they operate like any other growth fund (and that's why are as risky). However, an investor in these schemes gets an income-tax rebate of 20 per cent (for a maximum of Rs. 1 lakh) under section 80C.

Essentially, it is an incentive for the investor (who is otherwise investing in fixed-income instruments like the Public Provident Fund, National Savings Scheme, life insurance policies etc under the same section can also include tax saving mutual funds under the Income Tax laws) to participate in capital appreciation that can be delivered by investing in equity shares. That's also why these schemes also come with a three-year lock-in period. Also while other tax planning schemes guarantee returns, an ELSS offers no such assurance.

Index Fund :
Their goal is to match the performance of the markets. They do not involve stock picking by so called professional fund managers. An index fund essentially buys into the stock market in a way determined by some market index (BSE Sensex or S&P CNX Nifty) and does almost no further trading. Index funds are optimally diversified portfolios and only carry along with it the due to economy-wide factors.

But remember that the term 'growth' is often used in a very generic sense to denote every equity mutual fund. Also 'growth' in fixed income funds, comes from reinvesting dividends. That's why in such fixed income funds, investors have an option: they can choose either growth through reinvestment of dividends, or regular income by ticking on the income option. If you understand the types of funds, you should have a decent grasp on how funds invest their (our!) money.

Popular posts from this blog

ICICI Pru Mutual Fund Dividend

ICICI Prudential Mutual Fund has announced dividend under the following schemes: Scheme Dividend ( Rs /unit) ICICI Pru Capital Protection Oriented Ser V Plan B-D 0.03611325 ICICI Pru Capital Protection Oriented Ser V Plan B Direct-D 0.03611325 ICICI Pru Balanced Advantage Direct-DM 0.06 The record date has been fixed as February 08, 2017. ------------------------------ ------ Invest Rs 1,50,000 and Save Tax upto Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds Top 4 Tax Saver Mutual Funds for 2017 - 2018 Best 4 ELSS Mutual Funds to invest in India for 2017 1. DSP BlackRock Tax Saver Fund 2. Invesco India Tax Plan 3. Tata India Tax Savings Fund 4. BNP Paribas Long Term Equity Fund Invest in Best Performing 2017 Tax Saver Mutual Funds Online Invest Best Tax Saver Mutual Funds Online Download Top Tax Saver Mutual Funds  Application Forms For further information contact  SaveTaxGetRich on 94 8300 8300 ------------------------------ ------ Leave y...

What is Financial Freedom?

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)     There were many things common between our Freedom fighters. All had the Single vision (Free India), common goal (independence) and had a disciplined and focused approach. They were ready to do anything and everything and had made so many sacrifices to see India free . But the road to freedom was not easy .They had faced lot many hardships, went to jail so many times and even confronted physical and mental torture from the British. There was one more thing which proved to be an advantage to our fighters that most of them were professional lawyers. The knowledge of legal issues and its impact on our country at large has helped them counter various bills and proposed new laws by the then government. It is due to their continuous effort that we are able to achieve the goal of Independent Indi...

Hidden Bank Fees

  What Banks Hide From Customers Imagine after a peaceful and exciting holiday you receive your bank statement with steep charges. You then rush to your bank and start confronting staff members and to your dismay, you come to know that the high end debit card was charged very heavily. Wouldn't this cause damage to your finances? So remember, the world outside is full of deceptive and double cheating people. Unethical practices are always used by company sales person in order to meet the target. Credit card companies, mutual funds and bank institutions always play dirty tricks to lure customers and the practices are rampant. So here's how you should be careful while dealing with your banks: High End Debit Card Charges While opening an account with a bank you opt for a debit card with minimal charges. But later on when you upgrade your card and opt for high end debit card the annual charge rise by a good amount. Though such a card has slew of features but it all comes at a high ...

Partial withdrawal from PPF

  Public Provident Fund (PPF) account has a lock in period   If you opened a PPF account to meet your retirement needs,, think twice about withdrawing from this fund before retirement. But provided it's an emergency here are the rules. Public Provident Fund (PPF) account has a lock in period before which you cannot withdraw your money.   The partial withdrawal is allowed after the completion of 6 financial years . This means that you will be allowed a partial withdrawal from 1 April 2017. The maximum partial withdrawal allowed is the least of the following: 50 percent of the account balance at the end of fourth financial year, 31 March 15 50 percent of the account balance of the end of previous financial year, 31 March 17.   There's a loan option available on your PPF account between the fourth and the sixth financial year. You can obtain a loan of up to 25 per cent of the balance in your account. However, this will attract interest of 2 percent more than the prevailing ...

Updating a minor PAN card upon becoming adults

  Updating a minor's PAN card once they become adults A PAN card issued in the name of a minor does not contain the minor's photograph or signature, and therefore, cannot be used as a valid proof of identity. Once a minor PAN card holder turns 18, the relevant changes must be made in the PAN records. A new card is then issued bearing a photograph and signature. Application The applicant is required to fill up the "Request for new PAN card andor changes or correction in PAN data" form. The form can be filled up online by accessing NSDL's Tax Information Network website and clicking on the online PAN application tab. Information The applicant must mention the existing PAN number in the application and check the `photo mismatch' and `signature mismatch' boxes, and submit the online form. The form must also be printed out, signed by the applicant, and submitted along with two photographs. Documents Identity and address proof in the form of a copy of the app...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now