1. Equity mutual funds: These funds invest maximum part of their corpus into equity holdings. The structure of the fund may vary for different schemes and the fund manager’s outlook on different stocks. The Equity funds are sub-classified depending upon their investment objective, as follows:
- Diversified equity funds
- Mid-cap funds
- Small cap funds
- Sector specific funds
- Tax savings funds (ELSS)
Equity investments rank high on the risk-return grid and hence, are ideal for a longer time frame.
2. Debt mutual funds: These funds invest in debt instruments to ensure low risk and provide a stable income to the investors. Government authorities, private companies, banks and financial institutions are some of the major issuers of debt papers. Debt funds can be further classified as:
- Gilt funds
- Income funds
- Short term plans
- Liquid funds
Debt Funds rank lower on the risk-return grid and are suitable for shorter investment time frames.
3. Gold fund: A gold fund is a mutual fund that invests in 99.9% pure gold. This gold investment is a paper investment and does not attract any making charges that a gold jewelery would.
Gold Funds are a great option for those who want to buy gold for their kid’s wedding in few years.