Financial Education

Planning & Managing Finances

Mutual Funds

Comprehensive Guide to Mutual Fund Classifications and Scheme Types

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Financial education

Covers the use of digital tools, financial education, and the broader societal impact of financial literacy, with a focus on mutual funds, farmers, and responsible money practices.

Covers essential banking topics such as fraud prevention, investment tools like Demat accounts, government savings schemes, and RBI initiatives to promote financial inclusion.

•	Risk-return trade-off in financial decisions
•	Insurance: types, coverage, premiums, claims
•	Investment basics: shares, bonds, funds, real estate
•	Compound interest and long-term wealth accumulation
•	Diversification and portfolio principles
•	Fraud, scams and identity theft awareness

This is folder provide in formation about financial inclusion

This contains articles and information on financial frauds and raising awareness to prevent scams.

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This guide provides a detailed overview of mutual fund schemes, categorizing them by structure, management style, and investment objectives to help investors align their choices with specific financial goals. It covers a wide range of options, including equity, debt, hybrid, and passive funds, highlighting their unique characteristics and risk-return profiles.

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Mutual funds are investment options that pool money from multiple investors and invest it in stocks, bonds, and other financial instruments. This folder provides information about mutual fund types, benefits, risks, returns, and investment strategies.

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•	Income sources: wages, benefits, pensions, business income
•	Household budgeting and cash-flow management
•	Short, medium and long-term financial goal setting
•	Coping with financial shocks and irregular income
•	Saving: habits, instruments, interest calculations
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<h3>Classification and Types of Mutual Fund Schemes</h3>
Mutual funds can be classified in several ways, as they are designed to meet different investment needs and goals. They can be categorized based on structure, management style, and investment objective.
<h3>Scheme Classification by Structure</h3>
Open-ended Funds : Open-ended Funds allow you to invest in or redeem units on all business days at the current NAV. Thus, offering flexibility and easy access to your money. Close-ended Funds : Close-ended Funds have a fixed maturity period and can be redeemed only at maturity. However, units are listed on stock exchanges, allowing you to sell them before maturity if needed. Interval Funds : Interval Funds allow buying and selling only during specific periods decided by the fund. They combine features of both open-ended and close-ended funds and are listed on stock exchanges.
<h3>Scheme Classification by Management Style</h3>
Active Funds : Active Funds are managed by fund managers who actively select and manage securities based on research and market outlook, with the objective of outperforming a benchmark index. Passive Funds : Passive Funds are an investment option that aims to mirror the performance of a particular market index.
<h3>Scheme Classification by Investment Objective <img style="max-width: 100%; height: 174px; float: right;" src="https://static.vikaspedia.in/mediastorage/filestorage/20261029170459_Screenshot2026-10-29164126.webp" alt="Uploaded Image" width="194"></h3>
Mutual funds are designed to meet different investment goals such as
<ul>
<li>Capital growth</li>
<li>Capital preservation</li>
<li>Regular income</li>
<li>Liquidity</li>
<li>Tax saving</li>
</ul>
Based on these objectives, Mutual Fund schemes can broadly be grouped as follows:
Growth Funds: These funds aim for long term capital appreciation and may offer higher growth potential, but also involve higher risk by investing primarily in equities. They may be volatile in the short term but have historically delivered better long-term returns. Income Funds: These funds aim to provide regular income by investing in bonds and other fixed-income securities. Returns depend on interest rates and credit quality, and income is not guaranteed. Liquid / Overnight / Money Market Funds: These funds invest in very short-term instruments and focus on safety and liquidity. They are considered ideal for parking surplus money for short durations with modest returns.
<ul>
<li>Mutual fund schemes may also offer options such as Growth or Dividend/Income Distribution cum Capital Withdrawal (IDCW) to align with investor preferences.</li>
</ul>
<h3>Scheme Classification by Underlying Investment Portfolio</h3>
Based on Asset Class: Mutual funds may invest in equity, money market instruments and other liquid instruments, gold and silver instruments, and in InvlTs. Based on Strategy &amp; Style: Funds are further categorized by investment style, such as large-cap, mid-cap, value, income, or sector-based funds. The portfolio structure follows the fund's investment objective.&nbsp;
<h3>Equity Schemes <img style="max-width: 100%; height: 121px; float: right;" src="https://static.vikaspedia.in/mediastorage/filestorage/20261029170344_Screenshot2026-10-29164053.webp" alt="Uploaded Image" width="385"></h3>
An equity scheme is a fund that primarily invests in equities and equity related instruments, and is suitable for long-term wealth creation, though it may be volatile in the short term.
Equity schemes can further be categorized as
<ul>
<li>Large Cap Fund: At least 80% investment in equity &amp; equity related instruments of large-cap companies.</li>
<li>Mid Cap Fund: At least 65% investment in equity &amp; equity related instruments of mid-cap companies.</li>
<li>Small Cap Fund: At least 65% investment in equity &amp; equity related instruments of small-cap companies.</li>
<li>Multi Cap Fund: At least 75% investment in equity &amp; equity related instruments, with a minimum of 25% each in large-cap, mid-cap, and small-cap companies.</li>
<li>Large &amp; Mid Cap Fund: At least 35% investment each in equity &amp; equity related instruments of large-cap companies and mid-cap companies.</li>
<li>Flexi Cap Fund: At least 65% investment in equity &amp; equity related instruments.</li>
<li>Dividend Yield Fund: Predominantly invests in equity and equity-related instruments of dividend-yielding companies, with at least 80% allocation.</li>
<li>Focused Fund: Focuses on a limited number of companies (maximum 30), with at least 80% investment in equity &amp; equity related instruments.</li>
<li>Value Fund: Invests at least 80% in equity &amp; equity related instruments, seeking opportunities through a value investment strategy.</li>
<li>Contra Fund: Invests at least 80% in equity &amp; equity related instruments, seeking opportunities through a contrarian investment strategy.&nbsp;</li>
<li>Sectoral Fund: Invests at least 80% in equity &amp; equity related instruments of a particular sector.</li>
<li>Thematic Fund: Invests at least 80% in equity &amp; equity related instruments of a particular theme. A theme may be a combination of two or more sectors.</li>
<li>ELSS: At least 80% investment in equity and equity related instruments with attributes in accordance with the Equity Linked Saving Scheme, 2005, notified by the Ministry of Finance, has a lock-in period of 3 years and is currently eligible for deduction under Section 80C of the Income Tax Act up to 1,50,000 under the old tax regime.</li>
</ul>
<h3>Debt Schemes</h3>
Debt schemes primarily invest in bonds and fixed-income securities, aiming to provide income and capital preservation. Debt funds can be categorized based on the tenure of the securities
<ul>
<li>Overnight Fund: Investment in overnight securities having a maturity of 1 day.</li>
<li>Liquid Fund: Investment in debt and money market securities with a maturity of up to 91 days only.</li>
<li>Ultra Short Term Fund: Investment in debt and money market instruments with a Macaulay duration of the portfolio between 3 months and 6 months.</li>
<li>Ultra Short to Short Term Fund: Investmentin debt and money market instruments with a Macaulay duration of the portfolio between 6 months and 12 months.</li>
<li>Money Market Fund: Investment in money market instruments having a maturity of up to 1 year.</li>
<li>Short Term Fund: Investment in debt and money market instruments with a Macaulay duration of the portfolio between 1 year and 3 years.</li>
<li>Medium Term Fund: Investment in debt and money market instruments with a Macaulay duration of the portfolio between 3 years and 4 years.</li>
<li>Medium to Long Term Fund: Investment in debt and money market instruments with a Macaulay duration of the portfolio between 4 and 7 years.</li>
<li>Long Term Fund: Investment in debt and money market instruments with a Macaulay duration of the portfolio greater than 7 years.</li>
<li>Dynamic Term Fund: Investment across durations.</li>
<li>Corporate Bond Fund: Minimum 80% investment in corporate bonds rated AA+ and above.</li>
<li>Credit Risk Fund: Minimum 65% investment in corporate bonds rated AA and below.</li>
<li>Banking and PSU Fund: Minimum 80% investment in debt instruments of banks, public sector undertakings, public financial institutions, and municipal bonds.</li>
<li>Gilt Fund: Minimum 80% investment in G-secs across maturities.</li>
<li>10-Year Constant Maturity Gilt Fund: Minimum 80% investment in G-secs such that the Macaulay duration of the portfolio is equal to 10 years.</li>
<li>Floating Interest Rates Fund: Minimum 65% investment in floating-rate instruments (including fixed-rate instruments converted to floating-rate exposures using swaps/ derivatives).</li>
<li>Sectoral Fund: Minimum investment in debt and debt related instruments of a particular sector across duration (only in AA+ and above rated corporate bonds)- 80% of total assets.</li>
</ul>
<h3>Hybrid Schemes <img style="max-width: 100%; height: 139px; float: right;" src="https://static.vikaspedia.in/mediastorage/filestorage/20261029170021_Screenshot2026-10-29164109.webp" alt="Uploaded Image" width="409"></h3>
Equity Shares + Debt Securities = Hybrid Funds
Hybrid funds invest in a mix of equities and debt securities, and SEBI has classified them into seven sub-categories.
<ul>
<li>Conservative Hybrid Fund: 10% to 25% investment in equity &amp; equity related instruments and 75% to 90% in debt instruments.</li>
<li>Balanced Hybrid Fund: 40% to 60% investment in equity &amp; equity related instruments and 40% to 60% in debt instruments.</li>
<li>Aggressive Hybrid Fund: 65% to 80% investment in equity &amp; equity related instruments and 20% to 35% in debt instruments.</li>
<li>Dynamic Asset Allocation or Balanced Advantage Fund: Investment in equity/debt that is managed dynamically (0% to 100% in equity &amp; equity related instruments and 0% to 100% in debt instruments).</li>
<li>Arbitrage Fund: Scheme following an arbitrage strategy, with a minimum of 65% investment in equity &amp; equity related instruments.</li>
<li>Multi Asset Allocation Fund: Investment in at least three asset classes with a minimum allocation of at least 10% in each asset class.</li>
<li>Equity Savings Fund: Investment in equity &amp; equity-related instruments (minimum 65%), debt instruments (minimum 10%), and derivatives (minimum for hedging to be specified in the SID). (SID: Scheme Information Document)</li>
</ul>
<h3>Life Cycle Funds</h3>
Open-ended mutual fund schemes designed for goal-based investing, with a pre-decided maturity. These funds invest across different asset classes such as Equity, Debt, InvITs, ETCDS (Exchange Traded Commodity Derivatives), and Gold &amp; Silver ETFs. These funds may have a tenure ranging from 5 years to 30 years, in multiples of 5 years.
<h3>Solution Oriented Schemes</h3>
<ul>
<li>Retirement Fund: Retirement Funds are solution-oriented schemes designed for long-term retirement planning, with a lock-in of at least 5 years or until retirement age, whichever is earlier.</li>
<li>Children's Fund: Children's Funds are solution-oriented schemes designed to help plan for children's future financial needs, with a lock-in of at least 5 years or until the child attains the age of majority, whichever is earlier.</li>
</ul>
<h3>Understanding Passive Funds <img style="max-width: 100%; height: 293px; float: right;" src="https://static.vikaspedia.in/mediastorage/filestorage/20261029165853_Screenshot2026-10-29164150.webp" alt="Uploaded Image" width="175"></h3>
Passive Funds hold a portfolio that replicates a stated index or benchmark. The fund manager has a passive role, with stock selection and Buy, Hold or Sell decisions driven by the benchmark index.
<h3>Why Passive Funds?</h3>
Simple &amp; transparent - You know which index the fund aims to track. Rule-based investing - Investment decisions follow the index methodology rather than market calls. Cost-efficient - Lower portfolio management activity can mean lower costs.
<h3>How You Can Invest?</h3>
<ul>
<li>Index Funds</li>
<li>ETFs (Exchange Traded Funds)</li>
</ul>
<h3>Passive Schemes&nbsp;</h3>
Passive schemes offer investors different ways to participate in markets through indices, other mutual fund schemes or gold. They can further be categorized as
<ul>
<li>Index Fund: Investment in securities of a market index in the same weights as the index, passive with management and minor periodic adjustments. These funds may charge a maximum base expense ratio of 0.90% of daily net assets.&nbsp;</li>
<li>Exchange Traded Funds (ETFs): ETF is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. ETFs are listed and traded on stock exchanges, with units compulsorily held in Demat mode.</li>
<li>Fund of Funds (FoF): Investment in units of other mutual fund schemes based on the FoF's investment objective. Expenses are incurred at both the FoF and underlying scheme levels, subject &nbsp;to regulatory limits.</li>
<li>Gold Exchange Traded &nbsp;Funds: Investment in gold as the underlying asset, with each unit representing a specified quantity/value of gold as defined by the scheme. The scheme can invest up to 20% of net assets in the Gold Deposit Scheme of banks.</li>
</ul>
Source : <a title="External link that opens in a new window" href="https://www.amfiindia.com/uploads/AMFI_Understanding_Mutual_Funds_IAP_Booklet_Final_Website_version_860a5b77aa.pdf" target="_blank" rel="noopener">Mutual Funds Made Simple Understanding Mutual Funds</a>