The importance of any mutual fund is basically for small investors. Investments in the mutual fund are like hiring an Investment consultant by giving a small fee. The fund manager who is expert by qualification and experience (mostly a team of Investors as fund managers) takes the right kind of decision to further invest the fund provided by you.
Without mutual funds, Investment is very difficult to think. Why even equity? Take an example of debt. Reading all that many pages and understanding the meaning of the jargon. Makes it difficult. Many people are not experts in this job. Mutual funds can do it better.
Another thing is they channel Household saving to Capital Formation. Like what we know in India you can start investing with as low as $7. (₹500 by assuming ₹71.38= $1.) Makes a big change. In fact, this is changing some Habits about saving in India. Many people are investing regularly in India in small Amounts.
But What is This all? Let’s see.
Recently SEBI, Watchdog of Indian Capital Market, came up with some rules and With that, it decided What is supposed to be the type of Mutual Fund. They are
- Equity
- Debt
- Hybrid
- Solution-oriented
- Other Schemes
Equity is further classified in
- Multi-Cap
- Large-cap
- Large and Midcap
- Midcap
- Small-Cap
- DivideYield
- Value
- Contra
- Focus
- Sectoral/Thematic
- ELSS
Debt schemes classified into
- Overnight
- Liquid
- Ultrashort duration
- Low duration Fund
- Money market fund
- Short duration
- Medium Duration
- Medium to long
- Long Duration
- Dynamic bond
- Corporate bond
- Credit Risk fund
- Banking and PSU Fund
- Gilt Fund
- Gilt fund with 10-year constant duration
- Floater Fund
Hybrid Funds Classified into
- Conservative hybrid
- balance hybrid
- aggressive hybrid
- Dynamic asset allocation/ Balanced advantage
- Multi-asset allocation
- Arbitrage
- equity savings
Solutions categories are classified into 2. Retirement and children fund.
Others are also classified into 2. Index funds or ETF and FOFs which are overseas and Domestic.
There is no other Classification of Mutual funds hereafter
With this SEBI gave some very interesting notes I am mentioning them here.
- Definition of the Large-cap, Mid-cap, and Smal cap: Before this notification, there was no definition of the large-cap and mid-cap. Each AMC can decide which one is a large-cap and mid-cap. that ended with this notification. In SEBIs words, “from 1 to 100 companies in terms of full market cap are large-cap, from 101 – 250 are always midcap and whatever remaining is a small-cap”. This, in fact, ended one category micro-cap. The AMFI will make the list of such stocks. Before this, there are some cases that one AMC keeping more than one scheme for one category. It stopped here.
