Learn About the Different Categories of Mutual Fund Schemes
Learn About the Different Categories of Mutual Fund Schemes
Mutual funds are one of the most straightforward and transparent investment avenues in these times. But with so many mutual fund schemes going around with different names, it becomes a big task for the lay investor to identify a suitable scheme. To bridge this gap, SEBI released a Circular in October 2017, which contained guidelines on categorisation and mutual fund schemes. In the Circular, SEBI has made 5 broad categories and sub-categories within each category. This article explains the different types of mutual fund schemes and the essential characteristics/conditions of each category.
Category # 1: Equity schemes:
S. No. | Category | Scheme characteristics/minimum conditions |
1 | Multi-Cap Fund | Invest across large-cap, mid-cap, small-cap stocks Min. equity component – 65% |
2 | Large Cap Fund | Predominantly invest in large-cap stocks Min. equity component – 80% |
3 | Large and Mid-Cap Fund | Invest in both large-cap and mid-cap stocks Min. equity component (large-cap stocks) – 35% Min. equity component (mid-cap stocks) – 35% |
4 | Mid Cap Fund | Predominantly invest in mid-cap stocks Min. equity component (mid-cap stocks) – 65% |
5 | Small Cap Fund | Predominantly invest in small-cap stocks Min. equity component (small-cap stocks) – 65% |
6 | Dividend Yield Fund | Predominantly invest in dividend-yielding stocks Min. equity component – 65% |
7 | Value Fund | The scheme should follow a value investment strategy Min. equity component – 65% |
8 | Contra Fund | The scheme should follow a contrarian investment strategy. Min. equity component – 65% |
9 | Focussed Fund | Maximum 30 stocks Min. equity component – 65%AMC to mention where the scheme intends to focus, viz., Multi-cap, large-cap, mid-cap, small-cap) |
10 | Sectoral/Thematic Fund | AMC to clearly mention the sector/theme that the scheme shall focus on Min. equity component (for stocks belonging to that sector/theme) – 80% |
11 | Equity Linked Savings Schemes (ELSS) | The statutory lock-in period of 3 years Min. equity component – 80% (per Equity Linked Saving Scheme, 2005, as notified by the Ministry of Finance) |
Note: Mutual Funds will be permitted to offer either Value fund or Contra fund
Category # 2: Debt schemes:
S. No. | Category | Scheme characteristics/minimum conditions |
1 | Overnight Fund | Invest in overnight securities – Maturity of 1 day |
2 | Liquid Fund | Invest in debt and money market instruments – Maturity of up to 91 days |
3 | Ultra-short Duration Fund | Invest in Debt & Money Market instruments – Macaulay duration of the portfolio to be between 3 – 6 months |
4 | Low Duration Fund | Invest in Debt & Money Market instruments – Macaulay duration of the portfolio to be between 6 – 12 months |
5 | Money Market Fund | Invest in Money Market instruments – Maturity up to 1 year |
6 | Short Duration Fund | Invest in Debt & Money Market instruments – Macaulay duration of the portfolio to be between 1-3 years |
7 | Medium Duration Fund | Invest in Debt & Money Market instruments – Macaulay duration of the portfolio to be between 3 – 4 years |
8 | Medium to Long Duration Fund | Invest in Debt & Money Market instruments – Macaulay duration of the portfolio to be between 4-7 years |
9 | Long Duration Fund | Investin Debt & Money Market instruments – Macaulay duration of the portfolio to be more than 7 years |
10 | Dynamic Bond | Investment across duration |
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