Explore Mutual Funds

Equity Schemes

Equity schemes are mutual funds that primarily invest in stocks or equity shares of publicly listed companies. These funds aim to generate long-term capital appreciation by investing in the equity market. By pooling money from investors, equity schemes help diversify your portfolio while providing the potential for higher returns as compared to traditional fixed-income investments like bonds or savings accounts.

Equity schemes are classified into various categories depending on the market capitalization of the companies they invest in, the investment strategy, and the risk-return profile. Let's dive deeper into these categories to help you make informed investment decisions.

Categories of Equity Schemes

• Large-Cap Equity Funds

  These funds invest primarily in large, established companies that have a market capitalization of more than ₹20,000 crore. The risk involved is relatively lower compared to mid-cap or small-cap stocks because these companies are stable and well-established. These are ideal for conservative investors looking for steady growth with moderate risk.

• Mid-Cap Equity Funds

  Investing in companies with a market cap between ₹5,000 crore and ₹20,000 crore, mid-cap equity funds offer a balance between risk and return. These funds aim to capture growth from companies that are not as large as the top market players but have high potential for growth. They can offer higher returns than large-cap funds, but the risk is also higher.

• Small-Cap Equity Funds

  Small-cap funds focus on companies with a market capitalization of less than ₹5,000 crore. While these companies have immense growth potential, they also come with high volatility. Therefore, they are best suited for investors with a high-risk appetite who are looking for potentially large returns over the long term.

• Sectoral/Thematic Funds

  These funds focus on specific sectors or themes like technology, healthcare, energy, or infrastructure. By concentrating investments in a particular sector, these funds provide a high-risk, high-reward opportunity, as they are directly impacted by the performance of that specific sector.

• ELSS (Equity Linked Savings Schemes)

  ELSS funds are a popular choice for investors looking to save taxes under Section 80C of the Income Tax Act. These funds have a lock-in period of 3 years, making them an attractive option for investors who seek tax benefits while investing in equities. They provide the dual benefit of capital appreciation and tax savings.

• Index Funds

  These are passive funds that track a market index, such as the Nifty 50 or Sensex. The aim is to replicate the performance of the index, making them ideal for investors who believe in the long-term growth of the market. Index funds are a low-cost, less-risky option for equity investors looking for steady, market-linked returns.

Debt Schemes

Debt schemes are mutual funds that primarily invest in fixed-income securities such as bonds, government securities, money market instruments, and corporate debt. These funds aim to provide regular income with lower risk by investing in instruments that offer fixed or predictable returns. Unlike equity funds that rely on stock market performance, debt funds are less volatile, making them an ideal choice for conservative investors looking to preserve capital while earning steady returns.

Debt schemes are an excellent choice for investors who seek stability, capital preservation, and income generation, especially in uncertain market conditions. Let’s explore the different types of debt schemes available and how they can fit into your investment portfolio.

Categories of Debt Schemes

• Liquid Funds

  Liquid funds invest in short-term money market instruments such as treasury bills, commercial papers, and certificates of deposit, with maturities of up to 91 days. These funds are considered highly liquid, meaning investors can redeem their units quickly, usually within a day or two. Liquid funds are ideal for parking surplus funds for short durations with low risk and provide a better return than traditional savings accounts.

• Short-Term Debt Funds

  Short-term debt funds invest in debt instruments with relatively shorter maturities, generally ranging from 1 to 3 years. These funds offer a moderate return, balancing risk and stability. They are suitable for investors looking to park their money for a short period while earning better returns than savings accounts or fixed deposits.

• Corporate Bond Funds

  Corporate bond funds primarily invest in bonds issued by companies. These funds offer higher returns than government bonds due to the slightly higher risk associated with corporate debt. Corporate bond funds are suitable for investors who are willing to take on some level of credit risk in exchange for potentially higher returns.

• Gilt Funds

  Gilt funds invest in government securities (G-Secs), which are issued by the government. Since these bonds are backed by the government, gilt funds are considered low-risk, making them ideal for risk-averse investors looking to preserve capital. However, the returns are typically lower compared to corporate bond funds or other riskier debt schemes.

• Income Funds

  Income funds invest in a mix of short-term and long-term debt instruments, including corporate bonds, government securities, and other fixed-income assets. These funds aim to provide a steady income stream while managing risk. They are appropriate for investors seeking moderate returns over the long term.

• Dynamic Bond Funds

  Dynamic bond funds are actively managed funds that invest in bonds with varying durations depending on interest rate movements. The fund manager changes the portfolio duration to optimize returns based on the interest rate outlook. These funds are suitable for investors looking for higher returns, but they come with some risk due to changes in interest rates.

• Credit Risk Funds

  Credit risk funds invest in lower-rated corporate bonds, aiming for higher returns by taking on additional credit risk. These funds can be volatile, and the risk of default is higher, making them suitable for investors with a higher risk tolerance who are looking for potentially higher returns.

• Tax-Saving Funds

  (ELSS for Debt) While typically associated with equity investments, some debt mutual funds, such as tax-saving bonds, offer tax benefits under Section 80C of the Income Tax Act. These funds are a great option for investors who want to save taxes while investing in low-risk debt securities.

Hybrid Schemes

Hybrid schemes, also known as asset allocation funds, invest in a mix of equity, debt, and sometimes other securities. The primary aim of hybrid funds is to provide investors with a diversified portfolio that balances the risk and return by combining the growth potential of equities with the stability and income of debt instruments.

Hybrid schemes come in various forms, depending on the proportion of equity and debt in the portfolio. The allocation between equity and debt varies, and some funds also include other asset classes like gold or real estate, depending on the fund’s objectives.

Categories of Hybrid Schemes

• Balanced Funds (Aggressive Hybrid Funds)

  Balanced funds typically invest around 65%-80% of their assets in equities, while the remaining portion is invested in debt instruments. These funds are ideal for investors who are looking for moderate to high returns while being willing to take on some level of risk. They aim to strike a balance between growth (equities) and stability (debt), making them suitable for investors with a medium to long-term investment horizon.

• Conservative Hybrid Funds

  Conservative hybrid funds allocate a larger proportion (around 70%-80%) of their assets to debt instruments and a smaller proportion (around 20%-30%) to equities. These funds are designed for risk-averse investors who prioritize capital preservation and steady income over high growth. Conservative hybrid funds tend to offer more stability and lower volatility, making them ideal for those looking for safer investments while still participating in equity market growth.

• Dynamic Asset Allocation Funds (Balanced Advantage Funds)

  These funds adjust their equity and debt allocations based on market conditions, interest rates, and the economic environment. The fund manager dynamically reallocates between equity and debt to optimize returns and manage risk. These funds are suitable for investors who are looking for a more flexible, actively managed approach to asset allocation.

• Multi-Asset Allocation Funds

  These funds invest in multiple asset classes, such as equities, debt, gold, and sometimes real estate or commodities. The goal of multi-asset allocation funds is to offer enhanced diversification and provide a hedge against market volatility. These funds are ideal for investors seeking long-term growth and risk reduction through broad diversification across different asset classes.

• Equity-Oriented Hybrid Funds

  These funds invest a substantial portion (typically 65% or more) in equities, but they also allocate a portion to debt instruments. They are suited for investors who are looking for equity-like returns but with a cushion of debt to reduce risk. Equity-oriented hybrid funds offer growth potential, while the debt portion provides stability.

• Target-Date Funds

  Target-date hybrid funds are designed for investors with a specific financial goal or time frame, such as retirement. These funds gradually become more conservative as the target date approaches, shifting their allocation from equities to debt. These funds are ideal for long-term goals, where investors want to reduce risk as they near their target date.

Solution Oriented Schemes

Solution-oriented schemes are mutual funds that are specifically structured to meet specific financial goals, such as retirement planning, child education, or long-term wealth creation. These funds are designed to provide a disciplined, structured investment approach, often with professional management, to help investors meet their objectives within a predetermined timeframe.

The primary advantage of solution-oriented schemes is that they align investments with the investor’s needs, offering tailored solutions to help them achieve their desired financial outcomes. These schemes are ideal for investors who have specific goals in mind and want a systematic approach to reach them.

Categories of Solution Oriented Schemes

Other Schemes