Mutual Funds: offers Investment Solution for all kind of investors

Mutual funds are becoming very popular investment vehicle in India. India MF asset under management (“AUM”) has increased from Rs 3.26 lakh crore as of Dec 2007 to Rs 21.27 lakh crore of Dec 2017. MF AUM has grown 6.5 times or at a CAGR of 20.6% over the last ten years.
Indian MF consists of 41 Mutual fund house and have in total of 1,904 schemes as of Dec 2017. Mutual fund classification helps us to understand the suitability.
Mutual fund classification
1.       Based on asset class

a.       Equity Funds—Equity funds invests in Equity securities. Equity funds can be further classified into large cap funds, Mid cap funds, small cap funds, Multicap funds, sector funds, thematic funds. Equity funds have potential to generate a long-term return of 12-20% (depending on the nature of the fund), however these funds are more volatile and hence suitable for aggressive investor as well as long term investor. Equity funds more tax efficient (as long-term capital gain tax above 1 year is Nil), highly liquid.

b.       Fixed Income Funds—Invests in Fixed Income securities. Fixed Income funds can be further classified into Gilt funds , Short term income funds, long term Income funds, Credit opportunities fund. Fixed Income funds have potential to generate a long term return of 8-12% (depending on the nature of the fund), the funds are less volatile and hence suitable for conservative investor, short term as well as long term investor. Fixed income funds more tax efficient and more liquid than fixed income instruments such as Bank FD, Corporate FD etc.

c.       Alternative funds—Invests in Alternative asset class like Gold, commodity, REIT. Alternative funds have potential to generate a long-term return of 8-20% (depending on the nature of the fund), these funds could be used to achieve diversification benefit.

2.       Based on Geography

a.      Domestic Funds- Domestic funds invests in asset classes within India.
b.  Global Funds- Global funds invests in asset classes outside India. These funds offers diversification benefit, Currency movement would affect the total return.

Conclusion: Mutual funds offer wide variety of schemes, an investor can take exposure to fixed income funds, equity funds, gold funds, commodity funds as well as REIT funds. Mutual funds act as one stop solution for all investment needs.
A clear understanding of the funds in terms of return/risk/tax/liquidity helps in determining the appropriate selection of funds. The funds suitable for different type of investor
Investor (Based on Risk Appetite)
Major Fund allocation to
Conservative investor
Short & long term fixed income funds
Moderate Investor
Balanced fund
Aggressive investor
Equity Funds

Investor (Based on Time horizon)
Major Fund allocation to
Long term investor
Equity funds
Medium term Investor
Long term fixed income funds, balanced funds
Short term investor
Money market funds & short term bond funds



Appropriate asset allocation is a must for a better financial future. Make your money work for you, feel free to get in touch with me on 0965-65708812 for financial planning & investment advisory.

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