Types of Mutual Funds
Types of Mutual Funds as per SEBI
SEBI (Securities and Exchange Board of India) classifies mutual funds into categories based on asset type, strategy, and structure to help investors make informed decisions.
Equity Schemes
SEBI classifies equity mutual funds into subcategories based on market cap and strategy:
| Category | Description |
|---|---|
| Large Cap Fund | Minimum 80% in large cap stocks (top 100 companies). |
| Mid Cap Fund | Minimum 65% in mid cap stocks (101st–250th). |
| Small Cap Fund | Minimum 65% in small cap stocks (251st onwards). |
| Multi Cap Fund | Minimum 25% each in large, mid, and small caps. |
| Flexi Cap Fund | Minimum 65% in equities with no market cap restrictions. |
| Focused Fund | Max 30 stocks; minimum 65% in equities. |
| ELSS (Tax Saving) | 3-year lock-in; 80C benefit; minimum 80% in equities. |
| Value Fund | Follows value investing; minimum 65% in equities. |
| Contra Fund | Follows contrarian strategy; minimum 65% in equities. |
| Dividend Yield Fund | Minimum 65% in dividend-yielding stocks. |
Debt Schemes
SEBI classifies debt mutual funds based on the maturity duration and credit risk of the instruments they invest in:
| Category | Description |
|---|---|
| Overnight Fund | Invests in overnight securities with 1-day maturity. |
| Liquid Fund | Invests in debt and money market instruments with maturity up to 91 days. |
| Ultra Short Duration Fund | Duration of portfolio between 3 to 6 months. |
| Low Duration Fund | Duration of portfolio between 6 to 12 months. |
| Money Market Fund | Invests in money market instruments with maturity up to 1 year. |
| Short Duration Fund | Portfolio duration between 1 to 3 years. |
| Medium Duration Fund | Portfolio duration between 3 to 4 years. |
| Medium to Long Duration Fund | Portfolio duration between 4 to 7 years. |
| Long Duration Fund | Portfolio duration greater than 7 years. |
| Dynamic Bond Fund | Active duration management strategy; no fixed maturity profile. |
| Corporate Bond Fund | Minimum 80% in highest-rated corporate bonds. |
| Credit Risk Fund | Minimum 65% in below highest-rated corporate bonds (A or below). |
| Banking and PSU Fund | Minimum 80% in debt instruments of banks, PSUs, and PFIs. |
| Gilt Fund | Minimum 80% in government securities (G-Secs) of varying maturities. |
| Gilt Fund with 10-Year Duration | Invests only in 10-year maturity government securities. |
| Floater Fund | Minimum 65% in floating rate debt instruments. |
Hybrid Schemes
Hybrid mutual funds invest in a combination of equity and debt instruments in varying proportions to balance risk and return. SEBI classifies hybrid funds into the following categories:
| Category | Description |
|---|---|
| Conservative Hybrid Fund | Invests 75–90% in debt and 10–25% in equity instruments. |
| Balanced Hybrid Fund | Invests 40–60% each in equity and debt instruments. No arbitrage allowed. |
| Aggressive Hybrid Fund | Invests 65–80% in equity and 20–35% in debt instruments. |
| Dynamic Asset Allocation (Balanced Advantage Fund) | Equity-debt allocation is managed dynamically based on market conditions. No fixed proportion. |
| Multi Asset Allocation Fund | Invests in at least three asset classes (e.g., equity, debt, and gold), with minimum 10% in each. |
| Arbitrage Fund | Minimum 65% in equity and equity-related instruments using arbitrage strategies. Low risk and tax-efficient. |
| Equity Savings Fund | Invests in equity, debt, and arbitrage opportunities with minimum 65% in equity (including arbitrage). |
Solution-Oriented Schemes
Solution-oriented mutual funds are designed to help investors achieve long-term life goals such as retirement planning or funding a child’s education. These schemes come with a mandatory lock-in period.
| Category | Description |
|---|---|
| Retirement Fund | Designed for retirement planning. Comes with a lock-in period of 5 years or till retirement age (whichever is earlier). |
| Children’s Fund | Aimed at securing a child’s future financial needs such as education. Comes with a lock-in period of 5 years or until the child turns 18, whichever is earlier. |
Other Schemes
Other mutual fund schemes include those that do not fall under traditional equity, debt, or hybrid classifications. These are often strategy-based or structure-based schemes offering specific advantages.
| Category | Description |
|---|---|
| Index Fund | Passively managed fund that invests in the constituents of a market index (e.g., Nifty 50, Sensex). Minimum 95% in securities of the tracked index. |
| Exchange Traded Fund (ETF) | Like index funds but traded on the stock exchange in real time. Can track indices, commodities, or sectors. |
| Fund of Funds (FoF) | Invests in other mutual fund schemes, domestic or international. May incur double layer of expenses. |