Mutual Fund Schemes in India – Which One to Choose?

Written by admin on May 8th, 2011

With the ever growing mutual fund schemes in India it is quite difficult to pick the right one that suits your needs and requirements. Each fund has a different strategy to focus on when investing. 

You can choose the one which meets your financial objectives. It’s always suggested you know the scheme well before deciding to invest. Don’t blindly invest on somebody’s guidance.
You need to research on the possible growth of your fund depending on the history and whether your financial objective will be met by choosing a particular scheme. 
It’s safe to invest in blue chip companies as they are already well established and carry low risk. There are plenty of schemes of mutual funds available in the market and we explain some of them in this article.

Types of mutual funds in India:

Open ended schemes: These do not have fixed maturity. Liquidity is the key feature. Here units can be bought / sold at net asset value (NAV) related prices whenever required.
Close ended schemes: These schemes have a fixed maturity period i.e. from 2 to 15 years. Need to be invested at the initial issue and you can buy / sell units on the stock exchange thereafter.
Interval schemes: This scheme is a combination of features which is both close ended and open ended. They may be traded in the stock exchange, open for sale or redemption at NAV related prices in predetermined intervals.
Growth Mutual fund: This scheme will provide you capital appreciation in medium / long term. Under this scheme the majority of the funds will be invested in equities even if there is a short term decline in anticipation of future appreciation.
Growth mutual fund is useful for people who want to invest in long term gains and is not for those who seek regular income or short term gains.
Income schemes: Under this scheme you can hope for regular and steady income. The funds will be usually invested in fixed income securities such as corporate debentures and bonds. However there is a limited scope for capital appreciation in these schemes. This scheme is ideal for retired people and for those who regular income.
Balanced schemes: These schemes provide capital growth as well as periodical income they earn to the investor. They would invest a part of the fund in stocks and rest in the fixed income securities as mentioned in the offer documents. These schemes would be ideal for those who seek moderate growth and income.
Money market / liquid schemes: This scheme has multiple benefits. It offers easy liquidity, capital preservation and moderate income. Here the funds are invested in safer and short term instruments. Under there schemes returns may be fluctuating from time to time depending upon the interest rates in the market.
Tax saving schemes: These are also known as tax mutual funds since they are mainly focus on saving tax. Tax incentives are offered to the investors under tax laws to promote long term investments in equities in terms of mutual funds.
Tax mutual funds are ideal for people who seek tax incentives.

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