Different Kinds of Mutual Funds

January 6, 2011   ·   0 Comments

Classification of Mutual Funds can be done in Many Ways:www.stockssavvy.com

Let us try to understand it a Systematic Way:

Types of Mutual Funds on the Basis of Investment Lockin Period:

Open- and Close-Ended Funds

1) Open-Ended Funds

At any time during the scheme period, investors can enter and exit the fund scheme (by buying/ selling fund units) at its NAV (net of any load charge). Increasingly, AMCs are issuing mostly open-ended funds.

2) Close-Ended Funds

Redemption can take place only after the period of the scheme is over. However, close-ended funds are listed on the stock exchanges and investors can buy/ sell units in the secondary market (there is no load).

Tax Saving Funds are close Ended Funds in which Min. Lockin Period is of Three Years.

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Types of Mutual Funds on the Basis of Investment Choice:

Some popular objectives of a mutual fund are –

Fund Objective What the fund will invest in
Equity (Growth) Only in stocks
Debt (Income) Only in fixed-income securities
Money Market (including Gilt) In short-term money market instruments (including government securities)
Balanced Partly in stocks and partly in fixed-income securities, in order to maintain a ‘balance’ in returns and risk
Tax Saving These are Closed Ended Funds which comes under 80C Investments
Debt Liquid Funds These Kinds of Funds you have the Freedom to Entering & Exiting at Will. This provides better return than Saving Account.

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Types of Mutual Funds on Investment Option:

Growth & Dividend Option

 1)     Growth Option: These Kind of Mutual Fund whatever Dividend is given by the Mutual Fund time to time according to the Performance will be invested back in that Mutual Funds & No. of Units will be allotted for that Dividend Money.

 2)     Dividend Option: Mutual Funds Provides Dividend to Investors time to time. This Dividend is Tax Exempted & No Income Tax is levied on it.

 Every Mutual Fund will either be categorized under Growth or Dividend Option. Make Sure you invest in the Mutual Funds According to your Needs. If one needs Liquidity in between then Dividend Option will be the Right Choice to Go for. But if Someone doesn’t Need money in Immediate Term, Then Growth Option is the Right one to go for.

Note: Always remember Return of Growth Option is Higher than that of Dividend Option

Savvy Technique: If you are going for a ELSS(Equity Linked Saving Scheme) i.e. Tax Saving Fund, Opt for a Dividend Option. The Money you get as Dividend can be reinvested in Other Open Ended Fund whose return are Lil better than that of ELSS Funds.

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 Let us try to See Each Type of Mutual Funds in Detail with the Kind of Return one is more likely to generate.

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Rajesh Singla

Rajesh is the founder & CEO of Stockssavvy, Stocks analyst,financial advisor by choice,software engineer by fate,biker,gamer,cricket lover n enthusiastic person. He believes in doing things not just to get by but to get Ahead...

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