Mutual Funds have gained major traction over the past decade. If you are considering investing in a mutual fund, it is important that you understand the basics of mutual funds and understand the types of mutual funds in India and their features so that you can make the right set of decision.

In this blog, we seek to discuss the different types of mutual funds in India. So, below are the classifications of mutual funds based on the different segments.

1. Equity Funds

Equity funds, as the name suggests, invest in equities and equity-based instruments. The money is invested in a different set of shares that may belong to different sectors, different market capitalization, and the likes. Equity funds are likely to offer the highest returns over the long term and but come with a high degree of risk.

2. Debt Funds

Debt funds invest in fixed income securities such as treasury bills, corporate bonds, government bonds, likes, and commercial papers. Depending on the duration of maturity of instruments, the funds are classified as Fixed Maturity Plans, Long Term Bonds, Gilt Fund, Short Term Plans, etc.

3. Money Market Funds

The money market is also known by the name as the cash market. The government, banks, or companies are the primary stakeholders who run the show in this market. These bodies secure funds for their operations by issuing instruments of very short term duration. These instruments come up with a high credit rating and are highly safe instruments for the purpose of investments. Money market funds are merely used for cash management or liquidity management purpose.

4. Hybrid Funds

Hybrid funds are the mix of both debt and equity. These funds often tend to provide the best of both worlds. Based on the combination of debt and equity, these funds are of two types – Monthly Income Plan and Aggressive Hybrid Fund.

4 Types of Mutual Funds in India

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