"Know the different types of mutual funds in India. Understand 4 types of mutual funds, schemes, and how to choose the right one for your goals."
Published: 7 May 2025
Updated: 7 May 2025
The money market has always been unpredictable, as well as ever-expanding, for the investors. Every day, a new problem comes up, and every day, a new strategy is revealed for us. In the pool of facilities, one that catches everyone's attention is the Mutual Funds. In a very short period, mutual funds have become one of the most popular choices for both new and experienced investors. It is a smart way to grow your wealth without choosing any individual or particular stock/bond.
But with so many types of mutual funds in India today, choosing the right one can feel overwhelming. Should you go for equity funds, debt funds, or a hybrid option? And what do those terms even mean? At My Mudra, we will help you understand all about mutual funds. Here we will break down for you the types of mutual fund schemes and everything in between in simple terms so that you can make clever choices with no trace of confusion.
The main thing that sets mutual funds apart from other financial products is their wide variety. The various types of mutual funds in India are available for individuals based on different needs and schemes. It caters to different investment horizons, risk levels, and financial goals. Mainly, there are 4 types of mutual funds, which further have many subcategories. Here is a comprehensive breakdown of multiple funds that modern investors can get:
One of the most common types of mutual fund schemes in India is the Equity Mutual Funds, which are basically invested in the stocks of various companies. This makes them the ideal bet for long-term capital growth, and the average return gained depends on the performance of the stock market in which you invest. That means they are also much riskier owing to the constant fluctuations in the market, but they have high return potential with time. As stated by SEBI, the equity funds must invest at least 65% of their equity portfolio. The types of equity mutual funds are further divided into:
These types of mutual funds are mainly designed to invest in big companies that have a credible track record in business. The large-cap funds include the top 100 companies when it comes to market capitalization. For instance, blue-chip firms such as HDFC, Reliance Industries, and others. They are much safer and are less volatile than small stocks under equity investment. It is expected to invest 80% of the equity assets along with other instruments into these funds.
These companies come between the top 101 and 250 positions based on their market capitalization. The minimum investment required in mid-cap mutual funds for equity and equity-related instruments should be at least 65% of total assets. That means the investors have a balanced growth and risks attached. These types of mutual fund plans are invested in firms that have emerged after losing their small-cap phase. However, they haven't become giant companies yet. They offer high volatility and high returns.
These types of mutual funds in India include smaller companies that rank beyond the 250th in market capitalisation. Even though these companies have considerable growth potential, they are the riskiest for investing in equity funds. That is because they are sensitive to market fluctuations. However, they offer good returns during the bull markets. The minimum investment required for small-cap companies is mainly 65% of the total assets.
The other mutual funds under this category also include Multi-Cap Funds, Sector/Thematic Funds, Value Funds, Dividend Yield Funds, Growth Funds, and ELSS.
Are you an investor searching for different types of mutual funds but are not sure which one offers more safety? If so, Debt Mutual Funds are the ones made for your needs. The funds are invested in fixed income instruments such as treasury bills, bonds, and money market. Since they are less risky compared to equity funds, they are best for investors looking for a safer option with steady income. The funds gained from it are mainly generated through interest and capital appreciation. It helps build good capital over time with minimal fluctuations. However, they may still have some risks involved.
Listed below are different types of debt mutual funds:
Among the various types of mutual fund, these investments are made for an extremely short period, with a maturity of only up to 91 days. It has minimal risk factors and higher liquidity, making it a great option for building surplus cash.
These types of mutual funds in India mature within 3-6 months with slightly higher gains than liquid funds. Plus, it also keeps the lower risk.
Low-duration mutual funds typically have a maturity period of 6 to 12 months and primarily invest in debt instruments. They have a balanced risk of interest rate and returns.
Even short-duration mutual funds are invested in financial instruments with a horizon of 1-3 years. It has a comparably lower risk that can be managed by the investors and offers moderate returns.
Medium-duration funds are also one of those types of mutual fund schemes that invest in debt and money market instruments. Its portfolio duration is mostly between 3 and 4 years.
Long-duration debt funds target securities up to 7 years of maturity. They are the best options for investors looking for long-term investments and are comfortable with fluctuations in interest rates.
Hybrid mutual funds are one of those types of mutual funds in India that combine both debt and equity funds. It offers the perks of diversification and asset allocation. They optimize rewards and risks based on the preferences of the investors. The different types of mutual funds in India available under this scheme can be sub-categorized into:
These types of funds require investment of over 65-80% of equity and debt of 20-30%. Aggressive hybrid funds are more growth-oriented but offer moderate stability.
The conservative hybrid funds have slight growth objectives and prioritize more safety. They allocate 10-25% to equity with 75%-90% to debt.
As the name suggests, the Balanced Hybrid Funds have a more balanced nature, offering a middle ground for equity and debt allocation. They invest 40-60% in both equity and debt.
These types of mutual funds take a shift from the usual equity and debt. They focus mainly on adapting to market volatility and changing conditions.
The investors who are searching for different types of mutual fund schemes with specific life goals rely on solution-oriented funds. These mutual funds are designed to fulfill a particular objective in life and are known to have lock-in periods. This makes them a more financially disciplined investment.
These mutual fund scheme helps pool investments that can be utilized in post-retirement life. They have a lock-in period of 5 years, which blends both equity and debt.
These types of mutual funds focus on goals like marriage, education, etc. They provide both growth and safety with a lock-in period of at least 5 years or till the time the child attains a mature age.
Investing in the best mutual funds also means considering how much risk you can bear and your financial preferences. Be clear about your monetary goals and objectives before making any big investment decision. You can build a diversified portfolio for different types of mutual fund schemes. This will help you maximize your returns and cut down on risks! At My Mudra, not only can you apply for loans against mutual funds, but you can also compare different mutual funds through our SIP calculator. Get started today!
80% of Indians haven't invested in Mutual Funds yet! Take charge of your financial future — don’t just follow the crowd. Start your investment journey today. Get a free assistance call with My Mudra Fincorp to understand which mutual fund suits your goals and risk profile best. Let's make your money work for you.
Ans: The best mutual fund will be the one that completely fits your investment needs. There are different types of mutual funds providing different benefits and features, while they may have some disadvantages and risks as well. Therefore, it eventually depends on an individual and their monetary goals.
Ans: Equity mutual funds are known to give the highest return. However, this may also mean increased risk due to market fluctuations. Before investing in any high-return funds, think about how much risk you can take and how long you can invest. To help reduce risks, consider diversifying your investments or using a mutual fund calculator to estimate returns on your investments.
Ans: The minimum amount that you require varies by different funds and companies. Typically, it ranges from ₹500 to ₹1,000 for one-time investments and ₹100 for monthly SIPs. Some funds may require a larger amount to get started.
Ans: The answer is simply “no limit.” There is no upper limit for mutual fund investment. You can invest as much as you want through SIPs or lump sums. However, some fund houses might stop accepting new money if they feel the market can't handle more investments. In such cases, you can explore similar funds from other companies.
Ans: In most cases, you can sell your mutual funds anytime you want. However, you have to keep in mind exceptions such as exit loads and lock-in periods before making the final decision.
