Classification of Mutual Funds based on Investment objective:
1. Liquid Funds:
Invest in highly liquid money market instruments and debt securities of very short tenure
Liquid funds are preferred by investors to park their money for short periods of time typically 1 day to 3 months due to short redemption period of 1 working day
2. Debt Funds:
A debt fund is a Mutual Fund scheme which invests in Fixed income instruments, such as Corporate and GOvernment bonds, corporate debt securities and money market instruments etc. that offer capital appreciation.
Debt funds are ideal for investors who want regular income, but are risk-averse
3. Equity Funds:
An equity fund is Mutual Fund scheme that invests predominantly in Equity stocks
In the Indian context, as per SEBI Mutual Fund regulations, an equity Mutual Fund scheme must invest at least 65% of the scheme’s assets in equities and equity related instrument.
Aim to provide growth rather than capital appreciation over time
4. Hybrid Funds:
Invest in a combination of equity and debt securities.
Proportion of equity and debt may vary.
Aim to provide for both income and capital appreciation.