Mutual funds can be divided into different categories on the basis of various attributes (such as asset class, risk profile, etc.). If divided on the basis of structure, mutual fund types can be categorized into three broad groups – open-ended, close-ended, and interval. The difference between these depends on the flexibility of purchase
- Equity Funds: Mainly investing in stocks, these are also referred to as stock funds. They invest money accumulated from investors belonging to varied backgrounds into the shares of several companies. The losses or returns are decided by the performance of these shares (price-hikes and drops) in the stock market.
- Debt Funds: Debt funds invest in various fixed-income securities such as securities, bonds, and treasury bills – Gilt Fund, Fixed Maturity Plans (FMPs), Liquid Funds, Long Term Bonds, Short Term Plans, and several monthly income plans among others – all with proper interest rates and maturity date.