Classification of Mutual Funds 

Based on the structure: 

Open ended Schemes 

      Investments in open ended schemes can be made at any point of time and can be redeemed at any point of time. There are no lock-in periods.  

Close ended Schemes 

      Investment is close ended schemes can neither be made at any point of time nor can be redeemed at any point to time. They come with a lock in period of around three to five years; hence the liquidity is very low. Investments are made at the time of issue of units. 

Based on the investment philosophy 

Growth funds 

      The basic objective of such schemes is capital appreciation. A large portion of the entire fund corpus is allocated to equities. The investment time horizon is medium to long term. Such fund schemes provide options of dividend, reinvestment of dividend, simple capital appreciation etc. The risk factor is high. 
 

Balance funds 

      The main objectives of such fund schemes are too provide a decent steady income accompanied by a slight capital appreciation. They are a mix of the growth fund and the debt funds. The risk factor is medium. 
 

Debt funds 

      These kinds of schemes are meant to provide constant and regular predictable income source to its investors. A major portion of the fund corpus is dedicated towards debt investments like fixed interest rate bonds, National Corporation bonds, commercial papers etc. The returns are linked to the risk free rate of returns prevailing in the market. The risk factor is low.

Sector funds 

      Sector funds are dedicated towards particular sectors. The entire fund corpus is invested into various institutions and organization of a particular sector. Examples of sector funds are infrastructure funds, FMCG fund, IT fund, Automobile fund, Real estate fund, Lifestyle funds, etc.