These are schemes that do not have a fixed maturity. The mutual fund ensures liquidity by announcing sale and repurchase price for the unit of an open-ended fund.
These are schemes that have a fixed maturity. The money of the investor is locked in for the period. Occasionally, closed-end schemes provide a re-purchase option to the investors, either for a specified period or after a specified period. Liquidity in these schemes is provided through listing in a stock market; however this option is not yet available in India.
Equity schemes primarily invest in shares. Based on the objective investments could be in growth stocks where earnings growth is expected to be high or value stocks where the view of the fund manager is that current valuations in the markets do not reflect the intrinsic value. Various kinds of equity schemes are:
- Equity Diversified:
All non-theme and non-sector funds can be classified as equity diversified funds.
- Mid Cap:
These funds invest in companies from different sectors. However they put a restriction in terms of the market capitalization of a company, ie, they invest largely in BSE Mid Cap Stocks.
ELSS is an open-ended equity growth scheme that is offered by mutual funds in line with existing ELSS guidelines. The investments under this type of scheme are subject to a lock-in period of 3 years and, as per the Finance Act 2005, are allowed the benefit of income deduction up to Rs 1, 00,000.
These schemes invest in various sectors but restrict themselves to a particular theme eg, services, exports, consumerism etc.
- Sector Specific:
These are schemes that invest in a particular sector for example IT. They have a high degree of risk associated with them as if that particular sectors does not perform then their returns will suffer.
These kinds of schemes invest across market caps.
Such a fund invests in interest bearing securities mainly government securities and corporate bonds. This fund earns returns for its investors from interest income on its investments and profits on trading securities. In terms of risk, this type of fund is the least risky.
These schemes invest in short term debt instruments issued by the government, corporate or banks. These are typically investments in short term papers like the CPs and CDs etc.