Mutual funds need no introduction. They are one of the most popular investment vehicles in the country today. Mutual funds allow a group of investors to pool their money together and taste a broader range of stocks or bonds than they could if they were trying them on their own. There are many categories of mutual fund schemes available today and in each category there are 100s of mutual funds present akin to stars in a milky way. But depending upon the category of mutual fund scheme you invest in, the earnings from such investments can be in the form of regular income (dividend payouts) and/or capital appreciation. The taxation differs for different categories of mutual fund schemes. The characteristics of growth oriented mutual fund categories and the top funds under each category based on last 5 years' performance are :
Equity diversified Mfs - Equity diversified funds invest primarily in stocks across sectors and industries. Hence it minimises the risk of exposure to a single company or sector. These funds can be large cap, mid cap or small cap oriented depending on the fund manager's style and investment objective.
Exchange traded funds - ETFs are funds that track stock market indexes. The main difference between ETFs and other types of index funds is that ETFs don't try to outperform their corresponding index, but simply replicate its performance. ETFs are highly valued for their low cost in terms of expense ratios. Since they don't have managers actively buying and selling investments within the funds, the costs to run them are significantly lower.
Balanced funds – Balanced Funds (also called hybrid funds) provide investors with a single mutual fund that combines both growth (equity) and income (debt), by investing in both stocks and bonds. Such diversification ensures that the funds will manage downside of the stock market fluctuations without too much of a loss; the flip side is that balanced funds will usually give returns less than an all-equity fund during a bull market.
