What are Mutual Fund Investments?

Mutual funds are an investment scheme that pools funds from investors and invests them across equities, bonds, debt instruments, money market securities, gold and more. Different types of mutual fund schemes have varying investment strategies, risk levels, and investment horizons. These are the types of mutual fund schemes:

Bandhan Equity Mutual Funds

Equity mutual funds are a type of mutual fund scheme that invests a large sum of their corpus in equity and equity-related securities. They invest in stocks of companies having different market capitalisations and belonging to different sectors. Equity funds may generally have a higher level of risk and they may be suitable for long-term wealth creation. There are several different types of equity mutual funds:

• Large Cap Fund:

  This mutual fund investment allocates a majority of its corpus in stocks of large-cap companies.

• Mid-Cap Fund:

  A mid-cap fund invests a majority of its corpus in stocks of mid-cap companies.

• Small Cap Fund:

  This fund invests a majority of its corpus in equity and equity-related securities of small-cap companies. Small-cap mutual fund schemes are high-risk and long-term investments.

• Equity-Linked Savings Scheme:

  This is a tax saver mutual fund scheme. Investors can claim deductions up to ₹1,50,000 under Section 80C of the Income Tax Act, 1961. It serves the dual purpose of tax saving and wealth creation in the long term.

• Large and Mid Cap Fund:

  This is a high-risk and long-term equity mutual fund. It allocates a majority of its corpus to stocks of large and mid-cap companies.

• Value Fund:

  This type of mutual fund invests in undervalued stocks to potentially make higher returns in the long run.

• Flexi Cap Fund:

  This type of mutual fund scheme invests across market capitalisations and aims to provide the investor with a diversified portfolio. The fund can adjust its allocation as per market conditions or the fund`s investment strategy.

• Multi Cap Fund:

  This is a high-risk and diversified equity mutual fund. It invests across different market capitalisations. At least 25% of its corpus must be allocated to small, mid and large cap equities each.

• Focused Equity Fund:

  This is a high-risk equity scheme that invests in a limited number of stocks. By focusing on high-performing stocks, a focused equity mutual fund may potentially obtain better returns.

• Infrastructure Fund:

  This is a high-risk sectoral mutual fund that invests in stocks of companies involved in the infrastructure sector.

• Transportation and Logistics Fund:

  This is a sectoral mutual fund scheme that invests in stocks of companies involved in the transportation and logistics sector.

• Financial Services Fund:

  This is a high-risk sectoral mutual fund plan that invests in stocks of companies involved in the financial sector.

Bandhan Debt Mutual Funds

Debt mutual funds are an investment scheme that invest in fixed-income securities. They may have varied risk levels, investment horizons and investment strategies. Generally, debt funds aim to provide investors with optimal returns. There are several types of debt mutual fund schemes:

• Overnight Fund:

  This is a low-risk mutual fund scheme that invests in securities with a maturity period of 1 day.

• Liquid Funds:

  This is a short-term, low-risk and highly liquid mutual fund investment plan that invests in securities with a maximum maturity period of 91 days.

• Ultra-Short Term Fund:

  This short-term, low-risk mutual fund scheme invests in securities with a maturity period of 3 to 6 months.

• Low Duration Fund:

  This debt mutual fund plan invests in securities with a maturity period of 6 to 12 months.

• Money Manager Fund:

  This debt mutual fund scheme invests in securities with low-interest rate risk and relatively low credit risk.

• Corporate Bond Fund:

  This type of mutual fund invests in corporate bonds in India.

• Floating Rate Fund:

  This debt mutual fund plan is low risk and has a low interest rate. They may generate short-term optimal returns.

• Banking and PSU Debt Fund:

  This mutual fund investment plan invests in banking institutions and other public sector companies.

• Short Duration Fund:

  This is a low-risk mutual fund scheme that matures in one to three years.

• Medium Duration Fund:

  This is a moderately risky mutual fund in India that matures between three to four years.

• Medium to Long Duration Fund:

  This is a moderately risky, long-term mutual fund investment plan that matures between four to seven years.

• Government Securities Fund:

  This fund invests in government securities with relatively high interest rate risk and low credit risk.

• Dynamic Bond Fund:

  This is an actively managed mutual fund and its portfolio changes dynamically. It attempts to benefit from rising and falling interest rates.

• Credit Risk Fund:

  This is a high-risk debt mutual fund that invests in AA-rated bonds.

Bandhan Hybrid Mutual Funds

Hybrid mutual funds invest in more than one asset class such as equity, debt, gold etc. They attempt to provide investors with the potential benefits of diversification. The asset allocation of the fund may differ based on its investment objectives. These are the types of hybrid mutual funds in India:

• Arbitrage Fund:

  This mutual fund invests in equity, debt and money market instruments. The fund manager may buy and sell shares in different markets simultaneously. The fund aims to gain returns due to the price difference between the cash and derivative.

• Equity Savings Fund:

  This mutual fund scheme invests across debt funds, equity funds, fixed-income securities and arbitrage funds. This diversified asset allocation may reduce risk level.

• Balanced Advantage Fund:

  This is also known as a dynamic asset allocation fund; the asset allocation of the fund changes based on market conditions. This fund is a moderately high-risk investment, suitable for potential long-term wealth creation.

• Conservative Hybrid Fund:

  This mutual fund investment invests predominantly in debt securities. It is mandated to invest between 75%-90% of its total assets in debt securities.

• Multi-Asset Allocation Fund:

  This mutual fund investment plan is mandated to invest at least 10% of its corpus in any three asset classes each. This asset allocation may help spread out risk and diversify an investor`s portfolio.

• Aggressive Hybrid Funds:

  This is a hybrid mutual fund scheme that invests predominantly in equity investments. The fund is mandated to invest between 65%-80% of its total corpus in equity and equity-related instruments. At least 20% of the fund must be invested in debt instruments.

Bandhan Index Mutual Funds and ETFs

Index mutual funds track a particular index and aim to replicate their returns by adopting a passive investment strategy. They may potentially have a lower expense ratio due to this investment strategy. These are the different types of index mutual funds in India:

• Equity Index Funds:

  These mutual fund schemes track equity market indices such as Nifty 50, S&P 500, Nifty 100 etc. They may be suitable for investors seeking to track these indices.

• Sector Index Funds:

  This type of mutual fund investment plan tracks the stocks of companies involved in a particular sector such as technology or healthcare.

• Commodity Index Funds:

  These index mutual funds in India track indices related to commodities. Commodity index funds may track indices related to commodities such as gold or oil.

• Bond Index Funds:

  These mutual fund investments reflect the performance of specific bond market indices.

• International Index Funds:

  These index funds track foreign market indices. Investors may diversify their portfolios by investing in foreign markets through these funds.

• Target Maturity Index Funds:

  These mutual funds have a target maturity period. They aim to generate income over the pre-established target maturity period by tracking a particular index.

ETFs or exchange-traded funds are mutual fund plans that are traded on the stock market. ETFs aim to generate returns by tracking a particular index. They offer investors the option of intraday trading; investors seeking flexibility in their investments may potentially benefit by investing in ETF mutual fund plans. These are the types of ETFs in India:

• Equity ETFs:

  These exchange-traded funds track a specific index. For example, Nifty 100 ETFs track the Nifty 100 Index. This investment can be traded on the stock exchange.

• Commodity ETFs:

  Commodity ETF mutual funds track the prices of commodities such as gold and silver.

Bandhan Fund of Funds (FoF)

Fund of Fund mutual funds pool investors' resources and invest them in various other mutual fund schemes. They aim to diversify an investor's portfolio across different types of mutual funds.

• Bond Fund of Fund:

  Bond fund of funds invest in other bond schemes. These funds may be suitable for investors seeking diversification across different debt schemes.

• Asset Allocation Fund of Funds:

  These FoF mutual funds may invest in various funds including debt funds, equity funds, gold funds etc. Asset allocation fund of funds offer three different plans, namely, conservative, moderate and aggressive, based on their risk level and asset allocation.

• International Fund of Funds:

  These mutual funds allow investors to invest in international mutual funds. Investors may benefit by diversifying their portfolios internationally.

• Multi-Manager Fund of Funds:

  These fund of funds are managed by multiple portfolio managers. Each portfolio manager may deal with a specific asset within the fund.

Who Should Invest in Mutual Funds in India?

Mutual funds generally diversify their assets across market capitalisations, sectors, geographic regions and asset classes. As a result, they may be suitable for investors seeking diversification in their investment portfolio. Mutual fund schemes have a variety of different risk levels and investment horizons. This variety in mutual fund schemes may potentially make them a suitable investment option for any investor. Investors seeking to invest smaller amounts of money periodically may potentially benefit from mutual fund investments. Systematic Investment Plans allow investors to invest in regular intervals. Certain mutual fund schemes such as ELSS have tax-saving benefits for investors. Consequently, investors seeking to save taxes may benefit from investing in ELSS. Investors must analyse the list of mutual funds available in India and carefully consider their risk tolerance, investment horizon and future goals before investing in any mutual fund scheme.

FAQs

• What are mutual fund investment plans?

  Mutual fund investments pool their funds to invest in equities, debt instruments, money market instruments, bonds etc. Their risk level and investment horizon may depend on the asset allocation.

 
• How to invest in mutual funds in India?

  Investors can invest in mutual funds by visiting our website. Identify the mutual fund scheme you wish to invest in, click the “Invest Now” button and fill in the required details.

 
• Are mutual funds risky?

  Some mutual funds may be relatively more risky. Some equity, index and hybrid mutual funds may be high-risk investments. This is because these funds invest in stocks that may be vulnerable to market fluctuations. Some mutual fund plans such as arbitrage funds or overnight mutual funds may have a relatively lower level of risk associated with them. Investors must carefully analyse the asset allocation and risk level of a mutual fund scheme before investing.

 
• Which mutual fund scheme is tax-free in India?

  No mutual fund is completely tax-free in India. However, ELSS funds have an added tax advantage. Investors can claim deductions on investment up to ₹1,50,000 under section 80C of Income Tax Act, 1961. These funds may serve the dual purpose of tax saving and wealth creation.

 
• Are mutual fund returns high?

  Mutual fund returns depend on the asset allocation of the fund and market conditions. Certain funds, such as equity mutual funds, maybe high-risk-return investments and aim to potentially help investors create wealth in the long run.

 
• What are the types of mutual funds in India?

  Mutual funds can broadly be divided into the following types, namely, equity, debt, hybrid, index funds, ETFs and Fund of Fund schemes.