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Mutual Fund Categories To Invest

Mutual Fund Categories To Invest

Are you considering investing in mutual funds? Then this is essential for you to know! Mutual fund categories are designed to help investors to choose a scheme based on the level of risk they are ready to take, the amount of money they can invest, their goals, the investment period, and so on.

So here are different categories of mutual fund schemes by SEBI for you.


  • Multi-cap Fund- An open-ended equity scheme that invests in large-cap, mid-cap, and small-cap stocks. With various investing styles, these funds ensure the best possible diversification. They are required to invest at least 65% of their total assets in equities, which include large, mid, and small-cap stocks.
  • Large cap Fund-Large Cap Mutual Funds invest at least 80% of their total assets in stock and equity-related instruments of large-cap firms. These funds have a medium risk-return profile.
  • Large & Mid-cap Fund- It makes investments in both major large cap and mid-cap stocks which will help you build wealth. The Large and Midcap Mutual Fund seeks to combine two types of firms: steady companies with large market capitalizations and medium-sized companies with aggressive development potential. Large stocks will be less risky, while medium-sized stocks will have greater upside potential. Both equities need a minimum investment of 35% of total assets each.
  • Mid cap Fund - In terms of market capitalization, mid-cap funds invest 65% of their assets in mid-sized companies.
  • Small Cap Fund- Small cap companies invest at least 65 % of their assets in equities and equity-related instruments. It is suitable for investors willing to take some risk in exchange for a high return.
  • Dividend Yield Funds - This fund invests 65-80% of its total assets in Dividend Yielding Equities / Stocks.
  • Value Fund - This scheme sticks to the value investment strategy. The minimum investment in stocks and equity-related instruments is 65% of total assets.
  • Contra Fund - This scheme implements a contrarian investing method, which comprises trading against the current market sentiment. Stock and equity-related instruments must account for at least 65 % of assets.
  • Focused Fund - This scheme invests in a maximum of 30 stocks with at least 65% in equity & equity related instruments. He or she can monitor and check if all of the stocks are performing to their full potential. The fund's primary goal is to provide portfolio diversity while remaining focused on the right stocks and sectors in order to build up strong returns.
  • Sectoral/ Thematic - This scheme invests in a particular sector. Sectoral funds, also known as thematic funds, invest in certain sectors such as banking, infrastructure, information technology, and pharmaceuticals. These funds have high risks since they are largely dependent on sector performance. The minimum investment in a specific stock is 80% of the total assets.
  • ELSS - An open-ended equity-linked savings scheme with a 3-year statutory lock-in period and tax savings. The minimum investment in stocks and equity-related instruments is 80% of total assets.


  • Liquid Funds-Liquid funds are debt mutual funds that invest in market instruments such as Treasury Bills, CDs, Commercial Papers, Term Deposits, Call Money, and so on. You can invest in debt and money market securities with maturities of up to 91 days. These funds are very liquid in nature and pose no risk.
  • Ultra Short Duration Fund- You can invest in assets with Macaulay durations ranging from 3 to 6 months. Ultra short-term funds are similar to liquid funds. However, they have a long-term perspective. (The Macaulay duration is the weighted average period to maturity of a bond's cash flows.)
  • Low Duration Fund-In low duration debt scheme, you can invest in assets with Macaulay durations ranging from 6 to 12 months. This category is considered as Low, Low-Return.
  • Money Market Fund-This strategy invests in money market instruments for 6 months to a year. Money market instruments were developed to help businesses, financial institutions, and governments finance their short-term liquidity needs. These funds hold instruments such as government bills and commercial paper (with original maturities of one year or less). Money Market Funds strive to give investors the best short-term income generation alternative possible while maintaining a well-diversified portfolio of money market securities.
  • Short Duration Fund-This scheme invests in securities with a Macaulay duration ranging from 1 to 3 years.
  • Medium Duration Fund- This fund invests in securities with a Macaulay term of 3 to 4 years.
  • Medium To Long Duration Fund-These schemes invest in debt and money market securities with a Macaulay term of 4 to 7 years.
  • Long Duration Fund- This fund makes investments in long-term debt securities having a maximum Macaulay duration of 7 years.
  • Dynamic Bond Fund- The dynamic debt plan invests in bonds of any tenure. Your investing horizon should be longer than 3 years. The term "dynamic" is used here because the length of the fund changes dynamically depending on the fund manager's view of interest rate movement.
  • Corporate Bond Fund- This portfolio mainly invests 80% of its total assets in the highest-rated corporate bonds. These are debt instruments with a 3-5 year investment horizon that are intended to raise capital by corporations.
  • Credit Risk Fund- Credit Risk Mutual Fund invests in corporate bonds with lower credit quality, exposing them to credit risk. If your investing horizon is 3-5 years, you can have some exposure to this fund. The minimum investment in corporate bonds is 65 % of total assets.
  • Bank & PSU Fund-This scheme invests 80% of total assets primarily in debt instruments of banks, public sector undertakings, and public financial institutions. As a result, the default risk is nil. Banking and PSU Debt Funds provide liquidity, have a low risk and volatility profile, and can deliver consistent returns.
  • Gilt Fund-These funds primarily invest in government securities with varying maturities, 80% of the total assets are exclusively invested by Gilt Funds (across maturity).
  • Floater Fund- This scheme invests 65 % of total assets in floating rate instruments. The floating rate fund invests in different types of debt, including bonds and loans.

Hybrid Schemes

  • Aggressive Hybrid Fund-  The hybrid scheme predominantly invests in stock and equity-related instruments. This category will have 65-80 % equity and 20-35 percent debt investments.
  • Balanced Advantage Fund- This fund is managed dynamically between equities and debt. Balanced Advantage Mutual funds are intended to reduce risk. This category will have 40-60 % equity & equity related instruments and 40-60 percent debt investments.
  • Multi-Asset Allocation- Multi-Asset Allocation Mutual funds allow you to invest in a variety of asset classes. This scheme puts at least 10% of its investment into more than three asset classes.
  • Arbitrage Fund-This scheme invests in arbitrage opportunities. A minimum of 65% of their total assets must be allocated to equities and equity-related instruments.
  • Equity Savings- This plan invests in equity, arbitrage, and debt. The overall corpus is divided into three parts: one-third in debt, one-third in arbitrage, and one-third in pure equity. In the Scheme Information Document, the minimum hedged and unhedged amounts are shown.


  • Index Funds/ETFs- Index mutual funds or Exchange Traded Funds imitate real indexes, such as the Sensex and the Nifty 50, by investing at least 95% of their total assets in securities.
  • Fund Of Funds (Overseas/ Domestic)-Mutual Funds are open-ended fund-of-fund schemes that invest in the underlying funds in this category i.e,  A fund invests in another fund. The underlying fund requires a minimum investment of 95% of total assets. This plan invests in an existing portfolio of diverse assets but it does not actively invest in bonds, equities, or other types of securities.

Now, select the mutual funds that meet your needs, risk tolerance, and financial goals. Happy Investing!

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