Mutual funds have advantages and disadvantages compared to direct investing in individual securities. The primary advantages of mutual funds are that they provide economies of scale, a higher level of diversification, they provide liquidity, and they are managed by professional investors.
Mutual fund are classified based on assets class, investment strategy, and risk profile. Broadly they include
1. Equity funds (Stocks),
2. Debt funds (bond) , and
3. Hybrid funds (a mix).
Equity funds
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Large cap mutual funds : These funds allocate significant portion of their assets to share companies enjoy a strong reputation in the market, and Large cap mutual funds, by nature, tend to be less volatile compared to mid – and small -cap funds.
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Mid cap Funds : Mid cap fund focus on equity shares of companies falling within the range of 101 to 250 as per SEBI’s classification. By investing in mid-sized companies, these mutual funds aim to strike a balance between the stability of large caps and the growth potential of small caps.
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Small cap funds : Small cap mutual funds channel a considerable portion of their funds into share of small-cap companies. While these funds carry a heightened level of risk, they also prevent the opportunity for greater returns compared to large-cap and mid-cap funds.
Debt funds
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Liquid Fund
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Money Market fund
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Dynamic bond fund
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Corporate bond fund
