Types of mutual funds in India

The main categories of mutual funds in India as classified by SEBI, and the risk-o-meter, explained simply.

Five broad groups

SEBI classifies mutual fund schemes into equity, debt, hybrid, solution oriented and other schemes such as index funds and fund of funds.

Equity schemes

Invest mainly in company shares. Examples include large cap, mid cap, small cap, flexi cap, multi cap, sectoral and thematic funds, and ELSS. They can be volatile and suit longer horizons.

Debt schemes

Invest in bonds and money market instruments. Types include liquid, overnight, short duration, corporate bond and gilt funds. They carry interest rate and credit risks, which differ by type.

Hybrid schemes

Mix equity and debt, and sometimes gold. Examples are aggressive hybrid, balanced advantage and arbitrage funds.

The risk-o-meter

Every scheme shows a risk-o-meter with six levels from low to very high. Read it together with the scheme documents before investing.

Choosing

Match the category to your goal, time horizon and comfort with ups and downs. A distributor can help you understand the options.

Keep learning

What is a SIP? A simple guide for beginnersHow to read a CAS (Consolidated Account Statement)Goal Planner

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For illustration only. Assumed returns are not guaranteed and actual results will differ. Not investment advice. Mutual fund investments are subject to market risks, read all scheme related documents carefully.