Types of Mutual Funds You Should Know About

Thinking of investing in mutual funds but not sure where to begin? You're not alone. With so many fund options out there, it can feel like you need a finance degree just to pick one.

But here’s the good news — you don’t.

Once you understand the types of mutual funds, you’ll be able to choose the one that fits your goals, risk appetite, and investment horizon.

Let’s break it down together.

 

Key Takeaways:

• Mutual funds are classified based on asset class, structure, and investment objective.
• You can pick funds for short-term goals, long-term wealth, tax-saving, or even retirement.
• Choosing the right type of mutual fund starts with understanding how they’re categorized.

What Are the Main Categories?

The most common way to classify mutual funds is by where your money is invested.

➤ Equity Mutual Funds

Your money is invested in the stock market — shares of companies across sectors.

Ideal for: Long-term goals like buying a house or building wealth

Types include:

• Large-cap, mid-cap, small-cap
• ELSS (tax-saving funds)
• Sector/thematic funds

 Higher risk, but higher return potential

➤ Debt Mutual Funds

These funds invest in fixed income instruments like government bonds, corporate debt, and treasury bills.

Ideal for: Low-risk, stable returns over short to medium term

Types include:

• Liquid funds
• Short/medium duration funds
• Gilt funds

 Lower risk, but returns are more modest

➤ Hybrid Mutual Funds

A mix of equity and debt — offering both growth and stability.

Ideal for: Balanced investors who want moderate risk and steady growth

Types include:

• Aggressive hybrid funds
• Conservative hybrid funds
• Dynamic asset allocation

 Balanced risk, diversified exposure

➤ Solution-Oriented & Others

Some funds are designed for specific goals:

• Retirement Funds: Lock-in period, long-term returns
• Children’s Funds: Planned for education or future needs
• Index Funds / ETFs: Track a specific market index
• Fund of Funds (FoFs): Invest in other mutual funds

 What About Fund Structures?

Apart from where they invest, mutual funds are also grouped by how they’re managed or accessed.

➤ Open-Ended vs Closed-Ended

• Open-Ended Funds: You can buy/sell units anytime. Most popular among retail investors.
• Closed-Ended Funds: Available for a fixed time. You can invest only during the New Fund Offer (NFO) and exit after maturity.

If you prefer flexibility, open-ended funds may suit you better.

➤ Interval Funds

These are a hybrid — you can redeem or invest only at specific intervals (like quarterly). Less common, but useful for those seeking structured liquidity.

➤ Active vs Passive Funds

• Active Funds: Managed by fund managers aiming to outperform the market.
• Passive Funds: Track an index like Nifty 50 or Sensex, with lower expense ratios.

Passive funds are gaining popularity due to their simplicity and cost-effectiveness.

 

 Conclusion

Now that you know the different types of mutual funds, you can choose wisely — whether you're aiming for high returns, tax-saving, or low-risk parking of surplus cash.

But here’s something else worth knowing — you don’t need to redeem your investments when you need cash.

At Quicklend, we help you borrow against your mutual funds instantly and affordably, so your long-term plans stay untouched.

 Explore our loan against mutual funds today