Mutual Fund Schemes and Its Types

What are the schemes of Mutual Fund?

  1. Open Ended Scheme - An open-ended scheme is a scheme which is available for subscription and repurchase on a continuous basis on all working days. They do not have a fixed maturity period. Net Asset Value (NAV) or price of an open-ended scheme is declared on a daily basis. Investors can buy and sell the units of an open-ended scheme at prevailing NAV. Open-end schemes offers liquidity and convenience to the investors.
  2. Close-ended Scheme - A close-ended scheme has a fixed maturity period ranging from 3-7 years. These schemes remain available for subscription only during a specified period on their launch. Investors have an option to invest in such schemes either at the time of their launch or they can buy or sell the units of these schemes on the stock exchanges where the units are listed. Net Asset Value (NAV) of these schemes is disclosed generally on weekly basis.
  3. Interval Schemes - It is a combination of the characteristics of both open-ended and closed-end schemes. The units of an interval fund can be bought and sold only during a specified time interval, e.g. 15 days, 1 month, 3 months or any other time period, which is predetermined by the mutual fund. Like open-ended scheme they open every now and then and do not remain closed for long periods and like closed-end scheme, they do not allow continuous buying and selling facility by the mutual fund and remain closed for the time interval as pre-specified by the mutual fund and also their units are listed on stock exchanges.

What are the types of Mutual Funds?

  1. Equity / Growth Fund - It provides capital appreciation over the medium to long term. The investment of such fund is made majorly in equities/ stock market. It is best suited for those investors who have a long-term outlook and looking for capital appreciation over a longer period of time. NAVs of such fund are likely to be much volatile.
  2. Debt / Fixed Income Fund - It provides a regular and steady income to investors. The investment of such fund is made majorly in debt/ fixed income securities. It is best suited for those investors who require a regular income during the period of investment.
  3. Money Market / Liquid Fund It provides liquidity, protects capital and generates moderate income. The investment of such fund is made majorly in money market instruments like Treasury Bills, Certificates of Deposit, Commercial Papers, Repurchase Agreements and Inter-Bank Call Money. It is considered as safe as bank deposit yet providing a higher yield. It is the safest among all types of mutual fund investments. It is best suited for the retail low income investors.
  4. Balanced / Hybrid Fund It provides both growth and regular income to the investors. The investment of such fund is made both in equities and fixed income instruments as indicated in its offer document. It is best suited for those investors who are looking for moderate growth with regular income. NAVs of such fund are likely to be less volatile compared to pure equity funds.
  5. Index Fund The investment of such fund is made in the securities in the same weightage comprising of an index. It replicates the portfolio of a particular index such as the BSE Sensitive index, S&P NSE 50 index (Nifty), etc. The NAVs of such fund will go up or down in accordance with the rise or fall in the chosen index. It follows a passive investment strategy.
  6. Sector fund - The investment of such fund is made in the securities of those sectors or industries as specified in the offer document e.g. Software, Pharmaceuticals, Real Estate, FMCG, etc. This fund is more risky in comparison with a diversified fund.
  7. Thematic Fund - The investment of such fund is made across the sectors related to the common theme like Multi-Sector, Infrastructure, International, Commodity, etc.
  8. Tax Saving fund (ELSS)- Equity Linked Savings Schemes (ELSS) offers tax rebate to the investors under sec 80C of the Income Tax Act, 1961. The investment of such fund is made majorly in equities/ stock market and it has a lock-in period of 3 years.
  9. Govt. Securities Fund - The main objective of such fund is to generate credit risk-free. The investment of such fund is made exclusively in government securities issued by the Central Government and/or State Government. Government securities have no default risk. It is best suited for those investors who are risk averse.
  10. Fund of Funds (FoF) - The investment of such fund is made primarily in other schemes of the same mutual fund or other mutual funds. It provides greater diversification through one scheme and spreads risks.
  11. Capital Protection Fund - vThe investment of such fund is primarily made in fixed income securities maturing in line with the tenure of the scheme and small portion of the fund is invested in equities which provides capital appreciation. It provides capital protection to the investors.
  12. RGESS Fund - Rajiv Gandhi Equity Savings Scheme (RGESS) fund offers tax deduction up to Rs 25,000 a year under Section 80CCG over and above the Rs 1 lakh exemption under Section 80C of Income Tax Act, 1961. The motive of RGESS is to motivate small investors to invest their savings in the capital markets. The maximum investment allowed under this scheme for claiming deduction under RGESS is Rs. 50,000 and the investor is eligible to get a 50% deduction of the amount invested under this scheme. The investment is locked-in for a period of 3 years from the date of purchase.
  13. Fixed Maturity Plans (FMPs) It has a defined maturity period. The investment of such fund is made in debt instruments which mature in line with the maturity of the scheme, thereby earning through the interest component (coupons) of the securities in the portfolio. It is a passive fund and active trading of debt instruments does not take place which results into lower expenses charged to the scheme.

Upcoming Bank Holidays

2017 February 24 is a bank holiday in Chandigarh due to Mahashivratri.
2017 February 27 is a bank holiday in Sikkim due to Losar.
2017 March 03 is a bank holiday in Mizoram due to Chapchar Kut.
2017 March 12 is a bank holiday in Jammu And Kashmir due to Holi (Jammu Province Only).

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