Mutual Funds
Learn, browse, and analyze from thousands of mutual fund schemes to make informed investment decisions.
What is a Mutual Fund?
A mutual fund is a professionally managed investment vehicle that pools money from many investors to purchase a diversified portfolio of stocks, bonds, or other securities. Think of it as a basket containing many different investments.
When you invest in a mutual fund, you are buying units of that fund, and you become a part-owner of its portfolio. This is an easy way for individual investors to achieve diversification and benefit from professional fund management without needing a large amount of capital or expertise.
Types of Mutual Funds by Asset Class
Equity Funds
These funds primarily invest in stocks (shares) of various companies. They have the potential for high returns but also come with higher risk. They are ideal for long-term goals like wealth creation or retirement planning.
Debt Funds
These funds invest in fixed-income securities like government bonds, corporate bonds, and treasury bills. They are considered safer than equity funds and are suitable for short- to medium-term goals and for investors seeking regular income with lower risk.
Hybrid Funds
These funds invest in a mix of both equity and debt instruments. They aim to provide a balance between growth and stability. The allocation between equity and debt can vary depending on the fund's objective (e.g., conservative, balanced, or aggressive).
Equity Funds: Understanding Market Capitalization
Equity funds are further categorized based on the market capitalization (size) of the companies they invest in.
Large-Cap Funds
These funds primarily invest in the top 100 companies in India by market capitalization. They are considered the most stable and least volatile among equity funds, suitable for investors with a relatively lower risk appetite but who still want equity exposure.
Focus: Stability and steady growth from established, blue-chip companies.
Mid-Cap Funds
These funds invest in companies ranked from 101st to 250th by market capitalization. These are medium-sized companies with high growth potential, but they are more volatile than large-cap stocks.
Focus: High growth potential from emerging companies.
Small-Cap Funds
These funds invest in companies ranked 251st and below by market capitalization. They have the highest growth potential but also come with the highest risk and volatility. Suitable for aggressive investors with a long investment horizon.
Focus: Maximum growth from undiscovered or niche companies.
Flexi-Cap Funds
These funds have the flexibility to invest across large-cap, mid-cap, and small-cap stocks without any minimum investment restriction in any one category. The fund manager decides the allocation based on market conditions and their outlook.
Focus: Dynamic allocation to capture opportunities across market caps.
Key Terminology
Understanding these terms will help you analyze mutual funds more effectively.