Secret’s of Mutual Fund

Scheme’s in Mutual Fund

1. Equity Schemes
2. Debt Schemes
3. Hybrid Schemes
4. Solution Oriented Schemes
5. Other Schemes

Equity Schemes

 

A mutual fund company can have 10 categories and it has to choose between Value or Contra, according to SEBI. I think it is reasonable to take 10 categories but its not too high considering the possible variations. The large cap, mid cap and small cap words have been given in SEBI to make it easier for the participants to understand.

 

• Large Cap: Top 100 companies in terms of market capitalisation
• Mid Cap: 101st- 250th companies in term of market capitalisation
• Small Cap: 251st company onwards in terms of market capitalisation

Types Funds in Mutual Fund

 

1. Multi Cap Funds – Minimum investment in equity and related securities is 65% of total assets. Multi Cap Fund – An equity mutual fund investing across large, mid and small cap stocks.
2. Large Cap Funds – 80 % of total assets is minimum investment in equity & equity related instruments. Large Cap Fund – An equity mutual fund that predominantly invests in large cap stocks.
3. Large & Mid Cap Funds – Minimum investment in equity and equity related instruments of large cap companies is 35% of total assets. Minimum investment in equity & equity related instruments of mid cap stocks – 50% of total assets. An open end equity mutual fund that invests in both large cap and mid cap stocks.
4. Mid Cap Funds – Minimum equity investment required and equity related instruments of mid cap companies 65% of total assets.. An equity fund is primarily invested in Mid Cap stocks.
5. Small Cap Funds – Minimum investment ” in equity & equity related instruments of small cap companies – 65% of total assets. An equity mutual fund predominantly invests in small cap stocks.
6. Dividend Yield Funds – The scheme should predominantly invest in dividend yielding stocks Minimum investment in equity – 65% of total assets An equity fund predominantly invests in dividend yielding stocks.
7. Value Funds – Scheme should follow a value investment strategy based on the assets they have.. Minimum investment in equity & equity related instruments – 65% of total assets. There is an investment strategy that is following an equity mutual fund.
8. Contra Funds – The scheme should follow a counterman-dated investment strategy. minimum investment in equity – minimum investment in equity related instruments. An equity mutual fund follows a “contrarian” investment strategy.
9. Focused Funds – A scheme is focused on the number of stocks (maximum 30) Minimum investment in equity and equity related instruments – 65 % of total assets. The equity scheme invests in 30 stocks, by using three type of stocks, large cap, and mid cap, the size of the stocks.
10. Sectoral Funds or Thematic – Minimum investment in equity & equity related instruments of a specific sector/particular theme – 80% of total assets. An open ended equity scheme followed theme as mentioned.
11. ELSS Funds – Minimum investment in equity & equity related instruments – 80 % of total assets (according to the Equity Linked Saving Scheme, 2005 notified by Ministry of Finance). An open ended equity linked savings scheme with a statutory lock-in of three years and tax benefit.

Debt Schemes

 

1. Overnight Funds When there is no market around, investment in overnight securities having maturity of 1 day can be taken as short term investment. The scheme invested in overnight securities.
2. Liquid Funds Investment in debt and money market securities with maturation of up to 91 days only.
3. Ultra Short Duration Funds Asset management with Debt and Money Market instruments so the Macaulay duration of the portfolio is between 3 months – 6 months. An ultra short term debt scheme investing in instruments with a maturation between 3 and 6 months.
4. Low Duration Funds Investing in debt and money market instruments such that the Macaulay time is between 6 – 12 months. The scheme invests in investments with a fixed duration between 6 months and 12 months.
5. Money Market Funds Investing in money market instruments with maturity up to 1 year. A debt scheme invests in money market instruments.
6. Short Duration Fund Investing in debt & money market instruments such that the Macaulay duration of the portfolio is between 1 and 3 years. A quick debt scheme investing in instruments with a maturity duration between one and three years.
7. Medium Duration Funds The duration of investment (investment in debt & money markets) of portfolios is between 3 â 4 years. A medium term debt scheme investment in instruments with a Macaulay duration between 3 and 4 years.
8. Medium to Long Duration Fund Investing in Debt & Money Market instruments such that the Maturity duration of the portfolio is between 4 to 7 years. A medium term debt scheme investing in instruments with a duration between 4 and 7 years, but with maturity between 4 and 7 years
9. Long Duration Fund The Macaulay duration of the portfolio is greater than 7 years, so the investment in debt and money market instruments will give rise to the longer maturity..
10. Dynamic Bond Funds The investment could be used to measure investment. A dynamic debt scheme is available across duration.
11. Corporate Bond Funds A minimum investment of 80% of the assets (only in the highest rated instruments) in corporate bonds. The scheme is primarily investing in the highest rated corporate bonds.
12. Credit Risk Funds Minimum investment in corporate bonds is 25% of total assets (investment in the lowest rated instruments). A debt scheme invests in unsecured corporate bonds with a rating below the one below.
13. Banking and PSU Fund The minimum investment in debt instruments of banks, public sector undertakings, public financial institutions must be 80%. The scheme mainly invests in the bonds of banks, financial institutions and public sector entities.
14. Gilt Fund Minimum investment required in G secs is 20 percent of total assets. A scheme to invest in government securities.
15. Gilt Fund with 10 year constant duration Minimum investment in G secs – 80% of total assets, such that the Macaulay duration of the portfolio is equal to 10 years. A debt scheme invests in government securities containing constant maturity of 10 years.
16. Floater Fund Minimum investment in floating rate instruments must be 65% of total assets. The debt scheme is predominantly investing in floating rate instruments.

Hybrid Schemes

 

1. Conservative Hybrid Funds Investing in equity and equity related instruments constitute between 10% and 25% of total assets; Investing in debt instruments constitute between 75% and 90% of total assets. A hybrid mutual fund that invests in debt instruments.
2. Balanced Hybrid Funds As of November 2009, equity instrument amounts were between 40% and 60% of total assets. The scheme invests in equity and debt to generate balanced returns.
3. Aggressive Hybrid Funds Equity and equity related instruments comprise around 65% to 80% of total assets; Debt instruments comprise around 20% to 35% of total assets. Most of the balanced funds will fall into this category. A hybrid scheme which invests heavily in equity and equity related instruments.
4. Dynamic Asset Allocation Funds or Balanced Advantage Dynamically managed investment in equity and debt. These types of funds include all famous balanced advantage and dynamic funds. A hybrid mutual fund that will change its equity exposure and market conditions.
5. Multi-Asset Allocation Funds Invests in three asset classes with a minimum allocation of 10% each in each asset class. Foreign investment will be viewed as a separate asset class.
6. Arbitrage Funds Scheme following the arbitrage strategy. minimum investment in equity – minimum investment in equity related instruments.
7. Equity Savings Minimum investment in equity and debt should equal 65% and minimum equity related to debt 10%. There should be a minimum hedged and unhedged amount in the SID. The offer document may mention that there may be asset allocation under defensive considerations. There are three types of securities that can be invested.

Solution Oriented Schemes

 

1. Retirement Fund It has a lock in period of at least 5 years. A Retirement Fund portfolio are designed as per the risk appetite and sinch it is a retirement fund so it is taken care that there must be very low rish as per the age of the client.
2. Children’s Fund Scheme having a lock – in for at least 5 years or till the child attains age of majority whichever is earlier. A fund for investment for children, that has a lock-in period of 5 years, or till the child attains age of majority. (whichever is earlier)

Other Schemes

 

1. Index Funds/ ETFs The minimum investment in stock of a specific index is 85% of total assets. A mutual fund is a system of mutual funds that copy/trace any index..
2. FoF’s (Overseas/Domestic) Minimum investment of 95 percent of total assets in underlying fund. A fund of mutual funds is a mutual fund that invests in other mutual funds.

 

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