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Different Types of Mutual funds Schemes

1. Diversified Equity Funds
These funds diversify the equity component of their Asset Under Management (AUM), across
various sectors. Such funds avoid taking sectoral bets i.e. investing more of their assets towards
a particular sector such as oil & gas, construction, metals etc. Thus, they use the diversification
strategy to reduce their overall portfolio risk.
2. Sector Funds
These funds are expected to invest predominantly in a specific sector. For instance, a banking
fund will invest only in banking stocks. Generally, such funds invest 65% of their total assets in a
respective sector.
3. Index Funds
These funds seek to have a position which replicates the index, say BSE Sensex or NSE Nifty.
They maintain an investment portfolio that replicates the composition of the chosen index, thus
following a passive style of investing.
4. Exchange Traded Funds (ETFs)
These funds are open-ended funds which are traded on the exchange (BSE / NSE). These funds
are benchmarked against the stock exchange index. For example, funds traded on the NSE are
benchmarked against the Nifty. The Benchmark Nifty BeES is an example of an ETF which links to
the stocks in the Nifty. Unlike an index fund where the units are traded at the day’s NAV, in ETFs
(since they are traded on the exchange) the price keeps on changing during the trading hours of
the exchange. If you as an investor want to buy or sell ETF units, you can do so by placing orders
with your broker, who will in-turn offer a two-way real time quote at all times. The AMC does
not offer sale and re-purchase for the units. Today, ETFs are available for pre-specified indices.
We also have Gold ETFs. Silver ETFs are not yet available.
5. Fund of Funds (FOF)
These funds invest their money in other funds of the same mutual fund house or other mutual
fund houses. They are not allowed to invest in any other FOF and they are not entitled to invest
their assets other than in mutual fund schemes/funds, except to such an extent where the fund
requires liquidity to meet its redemption requirements, as disclosed in the offer document of
the FOF scheme.
6. Fixed Maturity Plan (FMP)
These funds are basically income/debt schemes like Bonds, Debentures and Money market
instruments. They give a fixed return over a period of time. FMPs are similar to close ended
schemes which are open only for a fixed period of time during the initial offer. However, unlike
closed ended schemes where your money is locked for a particular period, FMPs give you an
option to exit. Remember though, that this is subject to an exit load as per the funds regulations.
FMPs, if listed on the exchange, provide you with an opportunity to liquidate by selling your
units at the prevailing price on the exchange. FMPs are launched in the form of series, having
different maturity profiles. The maturity period varies from 3 months to one year.


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