Mutual Funds are the easiest way of investing in Indian Equity or related assets. It is highly regulated by the Stock Market regulator SEBI. Many Retail Investors have grown their money to many times through long term investment in MFs.
However, there are numerous combinations of Market Cap- (Large, Mid and Small cap), Asset Classes (Like Gold, Debt, Equity), Sectors (e,g, IT Industry), Themes (e,g, Renewable Energy) and many sub categories. Following Description of few of these types Mutual Fund types could help in easy understanding, would still need Expert Advice to chose the appropriate funds, unless you have done rigorous research on this.
Large, Mid and Small Cap Funds
Normally, Biggest 100 listed stocks are considered as Large cap, next 150 are considered as Mid cap and everything else is Small cap (which can be further distributed to Micro cap). Larger the company in terms of Market Size, lesser is the Risk and also these are more liquid (which means in a downturn, when everyone wants to Sell, there would be Buyers still for these stocks). In general Large Cap companies cannot grow their Sales and Profit very rapidly due to their size, whereas that is much easier for Mid Cap or Small Cap companies. At the same time, large Cap companies have constant business, they are better protected for any sudden downturn. Hence, Large cap stocks are more stable (doesn’t go down too fast) and also unable to make very fast Stock market gains in comparison to Mid and Small cap.
Flexicap and Multicap Funds
Flexicap as the name suggest has the Flexibility to invest in any Market Cap stocks at mix of those at any point of time. These are most popular Mutual Funds and highly recommended for investors who are new to stock market. There are lots of Flexicap fund in the market form various Asset Management companies. We can guide to choose the one suitable for your need.
Multicap Funds on the other hand keeps at least 25% allocation to each Market cap (Large, Mid, Small cap). So, with one such Mutual Fund could be enough to investment in all Market Caps.
Multi Asset Funds, Balanced/Hybrid Funds and Debt Funds
Multi Asset funds as the name suggests holds different types of Assets, like Stocks, Gold, Real Estate, Bonds etc. Hybrid or Balanced funds invest in both Stocks and Debt/Bonds. Both these types funds are typically less risky and less volatile compared to full equity funds. but, in the longer time period returns could also be lesser than pure equity funds. When the Stock market is highly volatile, many investors choose to invest in such funds.
Debt funds invests in Bonds and money market instruments, They don’t invest in Equity (Stocks). There are various duration of Debt Funds starting with Ultra Short duration funds to long duration funds to Credit Risk funds. As Bonds and money market instruments are less volatile compared to Equity (Stocks), these funds are less volatile.
As Gold, Equity and Debt/Bonds don’t move in the same direction all the time (i,e,e they are not directly corelated), Conservative or not so aggressive investors can use one Multi Asset fund to diversify their investments in all types of investment avenues.
Sector or Thematic Funds
Different Sector industries performs differently at different times, based on various macro economical, govt policy, Geo-Political situations etc. Sector Funds are there to take benefit of potential rise of a sector by investing in Companies of that sector.
Thematic fund on the other hand invest companies of multiple Sector who could benefit from a single emerging theme..
Both these types of Mutual Funds are meant for more expert investor (not Novice investors), who can sense which sector or theme would be growing fast in next few years and what are the valuations for such companies. New generation Business Sector funds are launched to take care of this as the Fund Managers themselves try to understand the Sector or Theme change momentum in the stock market and they also change their investment strategies to adapt to this change dynamically.
Factor/Multi-Factor Indices and Funds
Other than the Market cap and the Sector/theme type of investing there are another type of investing called Factor investing (e,g, Value, Momentun, Quality etc.) and a combination of multiple factors called Multi Factor investment. Full details here
Invest through us
As AMFI registered MF Distributor, we could guide you based on your need and individual risk appetite to chose the appropriate fund out of hundreds and thousands of Mutual Funds available in India. We also assist you in your onboarding through highly trusted Assetplus App or website and also for KYC updates, setting up the right investments in your basket, so that you could invest through few clicks. You could invest both one time as well as periodic SIP investment mechanism with practically any amount. We also provide periodic or need based reviews of your investment portfolio and help in rebalancing based on your Needs or Market situation change etc.
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