Overview
Though the topic could sound very basic to many, for many others it would be a helpful guide to better understand mutual funds as an investment option.
Mutual funds offer schemes for varied investment objectives and risk appetites and each category fulfills a unique role in an investor’s portfolio.
AMFI Fund categorization
As per SEBI guidelines on Categorization and Rationalization of schemes issued in October 2017, mutual fund schemes are classified as
- Equity Schemes
- Debt Schemes
- Hybrid Schemes
- Solution-Oriented Schemes – For Children or Retirement
- Other Schemes – Index funds, ETFs, FOFs
Equity Schemes
Equity schemes primarily invest in equities and equity-related instruments are classified into the following categories and sub-categories.
Based on market caps
- Large Cap Fund
- Large & Mid Cap Fund
- Multi Cap Fund
- Flexi Cap Fund
- Mid Cap Fund
- Small Cap Fund
Based on a specific strategy
- Value Fund
- Contra Fund
- Dividend-yield Fund
- Focused Fund
- E.L.S.S. Fund
Sectorial and thematic
- Technology and related sector
- Infrastructure Fund
- FMCG Fund
- Banking & Finance Fund
- Others
- Pharma and healthcare
Sectoral funds
Sectorial funds invest in a particular sector of the economy such as infrastructure, banking, technology, pharmaceuticals, etc. Since these funds focus on just one sector of the economy, they limit diversification and are thus riskier.
Thematic funds
Thematic funds select stocks of companies in industries that belong to a particular theme – For example, Infrastructure, Service industries, PSUs, or MNCs. They are more diversified than Sectoral Funds and hence have lower risk than Sectoral Funds.
Snapshot
| Multi Cap Fund | At least 75% investment in equity & equity related instruments |
| Flexi Cap Fund | At least 65% investments in equity & equity related instruments |
| Large Cap Fund | At least 80% investment in large-cap stocks |
| Large & Mid Cap Fund | At least 35% investment in large-cap stocks and 35% in mid-cap stocks |
| Mid Cap Fund | At least 65% investment in mid-cap stocks |
| Small Cap Fund | At least 65% investment in small-cap stocks |
| Dividend Yield Fund | Predominantly invest in dividend-yielding stocks, with at least 65% in stocks |
| Value Fund | Value investment strategy, with at least 65% in stocks |
| Contra Fund | The scheme follows a contrarian investment strategy with at least 65% in stocks |
| Focused Fund | Focused on the number of stocks (maximum 30) with at least 65% in equity & equity related instruments |
| Sectoral/ Thematic Fund | At least 80% investment in stocks of a particular sector/ theme |
| ELSS | At least 80% in stocks following Equity Linked Saving Scheme, 2005, notified by the Ministry of Finance |
Debt Schemes
A debt fund invests primarily in bonds or other debt securities. Debt schemes are classified into the following categories and sub-categories
Based on Tenure
- Overnight Fund
- Liquid Fund
- Ultra Short Duration Fund
- Low Duration Fund
- Money Market Fund
- Short Duration Fund
- Medium Duration Fund
- Medium to Long Duration Fund
- Long duration Fund
Based on Issuer
- Gilt Fund
- Corporate Bond Fund
- Infrastructure Debt Fund
- Others
Based on Investment Strategy
- Floater Rate Fund
- Dynamic Bond Fund
- Ohers
Snapshot
| Overnight Fund | Overnight securities having maturity of 1 day |
| Liquid Fund | Debt and money market securities with maturity of upto 91 days only |
| Ultra Short Duration Fund | Debt & Money Market instruments with Macaulay duration of the portfolio between 3 months – 6 months |
| Low Duration Fund | Investment in Debt & Money Market instruments with Macaulay duration portfolio between 6 months- 12 months |
| Money Market Fund | Investment in Money Market instruments having maturity upto 1 Year |
| Short Duration Fund | Investment in Debt & Money Market instruments with Macaulay duration of the portfolio between 1 year – 3 years |
| Medium Duration Fund | Investment in Debt & Money Market instruments with Macaulay duration of portfolio between 3 years – 4 years |
| Medium to Long Duration Fund | Investment in Debt & Money Market instruments with Macaulay duration of the portfolio between 4 – 7 years |
| Long Duration Fund | Investment in Debt & Money Market Instruments with Macaulay duration of the portfolio greater than 7 years |
| Dynamic Bond | Investment across duration |
| Corporate Bond Fund | Minimum 80% investment in corporate bonds only in AA+ and above rated corporate bonds |
| Credit Risk Fund | Minimum 65% investment in corporate bonds, only in AA and below rated corporate bonds |
| Banking and PSU Fund | Minimum 80% in Debt instruments of banks, Public Sector Undertakings, Public Financial Institutions and Municipal Bonds |
| Gilt Fund | Minimum 80% in G-secs, across maturity |
| Gilt Fund with 10 year constant Duration | Minimum 80% in G-secs, such that the Macaulay duration of the portfolio is equal to 10 years |
| Floater Fund | Minimum 65% in floating rate instruments (including fixed rate instruments converted to floating rate exposures using swaps/ derivatives) |
Hybrid Schemes
Hybrid fund categories invest in a mix of varying combinations of Equity, Debt securities, and other Asset Classes
- Conservative Hybrid Fund
- Balance Hybrid Fund
- Aggressive Hybrid Fund
- Dynamic Asset Allocation / Balanced Advantage Fund
- Multi-Asset Allocation Fund
- Arbitrage Fund
- Equity Savings Fund
Snapshot
| Conservative Hybrid Fund | 10% to 25% investment in equity & equity related instruments; and 75% to 90% in Debt instruments |
| Balanced Hybrid Fund | 40% to 60% investment in equity & equity related instruments; and 40% to 60% in Debt instruments |
| Aggressive Hybrid Fund | 65% to 80% investment in equity & equity related instruments; and 20% to 35% in Debt instruments |
| Dynamic Asset Allocation or Balanced Advantage Fund | Investment in equity/ debt that is managed dynamically (0% to 100% in equity & equity related instruments; and 0% to 100% in Debt instruments) |
| Multi-Asset Allocation Fund | Investment in at least 3 asset classes with a minimum allocation of at least 10% in each asset class |
| Arbitrage Fund | Scheme following arbitrage strategy, with a minimum 65% investment in equity & equity related instruments |
| Equity Savings | Equity and equity-related instruments (min.65%); debt instruments (min.10%) and derivatives (min. for hedging to be specified in the SID) |
Solution-Oriented Schemes
- Retirement Funds
- Children’s Fund
Snapshot
| Retirement Fund | Lock-in for at least 5 years or till retirement age whichever is earlier |
| Children’s Fund | Lock-in for at least 5 years or till the child attains the age of majority whichever is earlier |
Other Schemes
- Index Fund
- Exchange Traded Fund (ETF)
- Fund of Fund (FOF)
- International Fund
- Target Maturity Fund
- Capital Protection Oriented Fund
- Fixed Maturity Fund (FMP)
Snapshot
| Index Funds | Minimum 95% investment in securities of a particular index |
| Fund of Funds (Overseas/ Domestic) | Minimum 95% investment in the underlying fund(s) |
| Exchange Traded Funds (ETFs) | Minimum 95% investment in securities of a particular index. ETFs are listed on stock exchanges. Unlike regular mutual funds, an ETF trades like a common stock on a stock exchange |
| International Funds | Enable investments in markets outside India, by holding in their portfolio one or more of the following: Equity of companies listed abroad, ADRs and GDRs of Indian companies, Debt of companies listed abroad, ETFs of other countries, Units of passive index funds in other countries, Units of actively managed mutual funds in other countries. |
| Capital Protection Oriented Funds | Close-ended hybrid funds that create a portfolio of debt instruments and equity derivatives. |
| Fixed Maturity Funds (FMPs) | Closed-ended funds that eliminate interest rate risk and lock in a yield by investing only in securities whose maturity matches the maturity of the fund. |
